Apple (NASDAQ:AAPL) presently holds the distinction of being the world’s most valuable company in terms of market capitalization, with Microsoft (NASDAQ:MSFT) hot on its heels. In recent times, Microsoft’s stock has outperformed Apple’s, driven by the perception among investors that Microsoft offers more promising growth prospects and is less exposed to China-related risks. Microsoft derives less than 2% of its revenue from China, in stark contrast to Apple, which relies on China for approximately 20% of its income. Additionally, Microsoft’s strategic positioning in sectors like artificial intelligence (AI) and cloud computing has piqued the interest of certain investors, making it a more appealing investment than Apple.
As of now, Apple’s market capitalization hovers around $2.8 trillion, a slight decline from its peak of nearly $3.1 trillion, but still ahead of Microsoft’s $2.4 trillion. While Apple’s share price has experienced a dip this month, Microsoft’s shares have remained stable, narrowing the market capitalization gap between the two giants to approximately $200 billion. Microsoft last held a larger market cap than Apple in November 2021.
There is a growing belief among some analysts that Microsoft has the potential to surpass Apple as the world’s most valuable company. Huntington Private Bank has expressed this sentiment, stating, “Microsoft possesses more of the qualities the market is currently seeking, and given our outlook on the growth potential of these two companies, it wouldn’t be surprising to see Microsoft take the lead. We have greater confidence in Microsoft’s profit margins, given the sustained growth prospects of cloud and AI over the next decade. Whether the iPhone can match that is uncertain.”
Currently, analyst ratings favor Microsoft over Apple. Microsoft’s recommendation consensus, representing the proportion of buy, hold, and sell ratings, exceeds that of Apple. Nearly 90% of analysts covering Microsoft recommend buying the stock, while only 65% hold a similar view of Apple. Microsoft is anticipated to experience double-digit revenue growth and a surge in net earnings per share in fiscal 2024 and the three subsequent years, thanks to the strength of its cloud business and its support for OpenAI, a rapidly growing startup behind innovations like ChatGPT.
According to Bloomberg data, Apple is projected to achieve positive revenue growth in fiscal 2024 and continue its expansion in the following two years. Nevertheless, its growth rate is not expected to be as robust as that of Microsoft. Needham & Co recently suggested that as AI gains prominence as an investment theme, Apple could slip to fourth place among U.S. stocks, trailing behind Microsoft, Alphabet (NASDAQGOOGL), and Amazon.com (NASDAQ:AMZN). Furthermore, Bernstein likened Apple to the “old IBM,” while Rosenblatt Securities hinted that Apple’s position as the most valuable company could be challenged by Nvidia (NASDAQ:NVDA), a company that has reaped significant benefits from the AI boom and is currently less than half the size of Apple.
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