On Thursday, the shares of Apple made a poor beginning to 2024 as concerns grew over demand while Microsoft became the world’s most valuable company. Shares of the company, which is headquartered in Redmond, Washington, were last trading up 1.6%, valuing it at $2.875 trillion as its early lead to making money off generative artificial intelligence put investors’ minds into gear.
Apple was trading at 0.9% below with a market capitalization of $2871 billion – this is the first time since ‘took it down’ that its valuation had gone under Microsoft’s value.
The Cupertino, California-based company’s shares had dropped to 3.3% in January as of the last closure, while Microsoft rose by 1.8%.
“Microsoft was bound to overtake Apple since Microsoft is growing at a faster pace and stands to gain more from the generative AI revolution,” said Gil Luria, an analyst with D.A Davidson.
This weakness in Apple stock comes after several rating downgrades fueled fears that sales for the iPhone would remain weak – especially in its biggest cash cow market, China.
The competitive threat posed by a re-emergent Huawei could prove to be “a headwind for future performance,” said brokerage Redburn Atlantic in its client note on Wednesday, while citing tensions between China and the U.S., which have exacerbated Apple pressure.
The brokerage included the services business of Apple – a shining star in recent quarters that could face adversities as regulators intensify their scrutiny on a wealthy deal that makes Google’s default search engine for iOS. Last year ended with a gain of 48% for shares in Apple, which just one month ago had its market capitalization peak at $3.081 trillion on Dec.
That was lower than the 57% growth recorded by Microsoft, which launched genAI-powered tools across departments after partnering with OpenAI and making ChatGPT. While Microsoft has been briefly the most valuable company above Apple on a few occasions since 2018, it last occurred in the time of corona.
Currently, Microsoft is seen in a more positive light on Wall Street. Reuters reported that the company has no “sell” rating, and almost 90% of brokerages covering this firm recommend it as a buying choice. Two analysts of the company rate it a “buy,” while two have given it an unfavorable outlook. Stocks of both companies seem rather pricey in terms of P/E ratios, an alternative that is commonly used to evaluate publicly traded firms.
According to data from LSEG, Apple is trading at a forward PE of 28, significantly higher than its average in the past decade which has been recorded as 19. Microsoft currently trades at around 31 times forward earnings, higher than its long-term average of 24.
