In a consensus among 13 institutional investors, Microsoft (NASDAQ:MSFT) is anticipated to overtake Apple (NASDAQ:AAPL) in stock market value over the next five years, primarily due to its early lead in artificial intelligence (AI). Microsoft’s shares have surged by 7% in 2024, propelling its market value beyond $3 trillion and surpassing Apple as the world’s most valuable company.
The investors, consisting of strategists and portfolio managers, unanimously agreed that Microsoft is expected to outpace Apple in terms of market value five years from now. While share prices and valuations might fluctuate during the upcoming quarterly results announcements from both companies, the investors believe Microsoft’s recent strides in generative AI provide it with a significant advantage over Apple in the long term.
Some investors suggest that the race between Apple and Microsoft could turn into a race for second place, with Nvidia gaining substantial ground. Nvidia’s chips have played a pivotal role in the AI revolution, and the company’s recent gains have been remarkable. Microsoft, having invested early in OpenAI, the creator of ChatGPT, and incorporating generative AI technology across its business is well-positioned to benefit from the growing AI market. AI advancements are expected to enhance Microsoft’s cloud-computing offerings, putting it in competition with Amazon and Alphabet.
Investors highlight Microsoft’s diverse portfolio, including Azure cloud, gaming, enterprise software, and AI, as factors contributing to its advantage. On the other hand, Apple, heavily reliant on the iPhone, faces challenges in the mature smartphone market. The company’s plans in the AI space are eagerly awaited, and its recent struggles in China, where iPhone demand has declined, add to the complexity.
While Apple has been incorporating AI into product functions, Microsoft’s lead in AI, particularly generative AI, is seen as more compelling. Microsoft’s stock has experienced a robust rally, with a 57% surge in 2023, and its forward price-to-earnings ratio is higher than that of Apple and the S&P 500.
Investors express confidence in Microsoft’s potential for aggressive growth, citing its ability to increase productivity. Wall Street analysts are overwhelmingly positive on Microsoft, with 50 analysts recommending buying its shares, while Apple has a mix of positive, neutral, and negative recommendations.
As the race for the most valuable company unfolds, Nvidia is also emerging as a contender, with its market capitalization recently surpassing $1.5 trillion, making it the fifth most valuable company on Wall Street. Analysts liken Nvidia’s current trajectory to Microsoft in the early ’90s and Intel in the early ’80s, positioning it as a potential frontrunner in the coming years.
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