Shares of Redmond, Washington-based Microsoft rose 1.5%, giving it a market valuation of US$2.888-trillion as its early lead in the race to make money from generative artificial intelligence helped draw investors.
Apple was 0.3% lower with a market capitalisation of $2.887-trillion — the first time since 2021 that its valuation has fallen below that of Microsoft.
The Cupertino, California-based company’s stock has slid 3.3% so far in January as of last close, compared with a 1.8% rise in Microsoft.
The weakness in Apple follows a series of rating downgrades that have fanned worries that sales of the iPhone, its biggest cash cow, would stay weak, especially in major market China.
“China could be a drag on performance over the coming years,” brokerage Redburn Atlantic said in a client note on Wednesday, pointing to competition from a resurgent Huawei and Sino-US tensions that have increased pressure on Apple.
The brokerage added Apple’s services business — a bright spot in recent quarters — faces threats as regulators deepen scrutiny of a lucrative deal that makes Google the default search engine on iOS.
Gen AI
Shares of Apple, whose market capitalisation peaked at $3.081-trillion on 14 December, ended last year with a gain of 48%. That was lower than the 57% rise posted by Microsoft, which aggressively rolled out generative AI-powered tools in 2023 thanks to its tie-up with ChatGPT maker OpenAI.
Microsoft has briefly taken the lead over Apple as the most valuable company a handful of times since 2018, most recently in 2021 when concerns about Covid-driven supply-chain shortages hit the iPhone maker’s stock price.
Currently, Wall Street is more positive on Microsoft.
The company has no “sell” rating and nearly 90% of the brokerages covering the company recommend buying the stock. Apple has two “sell” ratings and only two-thirds of the analysts covering the company rate it a “buy”.
Both the stocks look relatively expensive in terms of price to their expected earnings, a common method of valuing publicly listed companies. Apple is trading at a forward p:e of 28x, well above its average of 19 over the past 10 years, according to LSEG data. Microsoft is trading around 31x forward earnings, above its 10-year average of 24x.
Credit:Techfocus24.com