Apple (NASDAQ: AAPL) has been dethroned from its position as the largest company in the world. In its place rises Microsoft (NASDAQ: MSFT), although this was a transition many investors saw coming from a mile away.
Microsoft’s AI Dominance
Apple took over the title of the world’s largest company in 2011, but Microsoft’s rise as assessed by market cap, or stock price times the number of shares outstanding, speaks volumes about its potential.
So far in 2024, Apple’s stock has declined 2%, while Microsoft’s has risen 8.6%. This illustrates investors’ confidence in Microsoft’s future prospects. While Apple is still formidable, it lacks the products and strategy to thrive in an AI-driven market.
Microsoft’s strong foothold in artificial intelligence is a major driver of its ascent. Its partnership with OpenAI aligns it with a powerhouse in generative AI, positioning itself to power its Copilot – an AI tool that enhances productivity for Microsoft Office users, representing a potential game-changer for office workflows.
Furthermore, Microsoft’s significant presence in cloud computing allows it to provide the necessary computing resources for AI models, a critical factor in today’s data-driven landscape. This underscores its commitment to lead the AI revolution.
Unbelievable Valuations
Both Microsoft and Apple stocks are quite expensive when assessed on a price-to-earnings (P/E) basis. With Microsoft trading at nearly 40 times trailing and 36 times forward earnings, it’s considerably more expensive than Apple, which is pricey in its own right.
Microsoft’s meteoric rise is underpinned by high expectations. However, if it fails to deliver on these expectations, a significant downturn in its stock price is a plausible outcome. Nevertheless, if it manages to meet or exceed these high hopes, it could solidify its position as the premier company in the market for the foreseeable future.
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