The battle for market cap supremacy between Microsoft and Apple has intensified recently, with Microsoft’s focus on Artificial Intelligence (AI) significantly boosting it. As of early 2024, Microsoft is close to surpassing Apple as the most valuable company in the United States. This shift is reflected in the MSFT stock price, which has increased by around a trillion over the past year.
The rise in valuation is a good indicator of the market’s response to Microsoft’s strategic moves in AI and other technological advancements. On the other hand, Apple has declined its market value, partly due to slowing iPhone demand and competitive pressures.
Let us now understand what went behind the sudden uprise of Microsoft stocks and what exactly led to the downfall of Apple stock, simultaneously causing a hiatus in the trading market and the stockholders.
Microsoft’s Strategic AI Investments
Microsoft’s increasing market value is primarily attributed to its deep dive into generative AI. Over time, Microsoft has established itself as a pioneer in adopting AI and launched probably the most successful AI start-up, ChatGPT. It also includes significant investments in OpenAI and the integration of AI into its consumer and enterprise offerings.
One of the key AI initiatives is Copilot, an AI assistant feature for Microsoft 365 applications and services that enhance user experience and productivity. The company has also rolled out other AI upgrades to Azure cloud services and its search engine, Bing. The AI upgrade has given Microsoft tough competition and a head start against its rival in the AI game.
The company’s relationship with OpenAI, including a multibillion-dollar investment, signifies its commitment to leading in AI.
Market Impact of Microsoft’s AI Focus
The market’s response to Microsoft’s AI focus has been positive, as seen in the upward trend of the MSFT stock price. The company’s shares have risen to $348.10 apiece, an increase of 3.20%. Furthermore, the company’s stock has gained over 7% in the past five trading sessions and around 11% monthly. To sum it up, since the beginning of this year, Microsoft’s shares have seen a rise of 45%.
Analysts at JP Morgan have increased their target price for Microsoft’s stock. It also highlights that AI has increased the demand for the company’s products. Around 90% of the analysts that cover Microsoft’s stocks recommended people buy it, and the median target price for the same was $340.
Investors recognize the potential of AI to transform industries and drive growth. A study by Microsoft itself projected that AI would add around USD 10 trillion to the global GDP over the next decade.
It is suitable for Microsoft that it has already embraced the AI revolution and integrated AI into its offerings. Integrating AI into Microsoft’s products will add significant value to the GDP. Microsoft’s Copilot, an AI assistant feature available for Microsoft 365 applications and services, is built into the Windows 11 OS. CoPilot has come to be described as an “AI assistant at work.” It builds on Bing Chat but includes better security, privacy, compliance, and more responsible AI.
Moreover, Microsoft’s acquisition of Activision Blizzard, making it the world’s third-largest gaming company, further diversifies its portfolio and revenue streams.
Apple’s Market Position
Around July 2022, Apple was one of the companies with the highest valuation in the US. It had even reached the $3 trillion valuation mark. However, the company’s poor stock performance, in addition to the recent AI-focused developments by other companies, especially Microsoft, led to a decline in the value of Apple’s stocks.
While Microsoft has been making significant strides, Apple’s market position has experienced some challenges. Apple’s stock price has declined due to competitive pressures, particularly in the Chinese market, where it faces intense competition from companies like Huawei.
The sale of iPhones dropped to 30% in the Chinese market in the first week of 2024. Where around 90% of the analysts recommend buying Microsoft’s stocks, only 65% of the analysts can voice for those of Apple.
Although analysts predict more future growth for Microsoft, it doesn’t mean that all hope is lost for Apple. Their stance when it comes to Apple is just a little more cautious. The situation improved slightly when one of Wall Street’s broker-dealers joined the debates and advocated for Apple.
Despite the challenges that it is facing, Apple remains a formidable player in the tech industry, with a history of innovation and a solid customer base.
Microsoft’s strategic focus on AI and its recent technological advancements have potentially positioned it to overtake Apple in market capitalization. This development highlights the importance of innovation and diversification in maintaining a competitive edge in the technology sector. As the market dynamics continue to evolve, both Microsoft and Apple will likely continue to adapt and innovate to maintain their leadership positions in the industry.