Apple faces the risk of being surpassed by Microsoft as concerns about iPhone sales contribute to a recent decline in the Silicon Valley tech giant’s stock. But it’s not just a case of two giant trading places: Microsoft’s market cap is also higher than that of Apple, and it stands to become the world’s most valuable company sooner rather than later.
The market cap a measure of the value of all outstanding shares of publicly traded companies is the most common way to rank companies by size. Microsoft and Apple are valued at over $2 trillion, but the former is poised to take the title from the latter.
The two tech titans are in a virtual dead heat when it comes to being the world’s most valuable company, as they’re separated by less than $180 billion in market value. Apple has a reputation for producing high-quality products that command loyal customer loyalty, while Microsoft has gained popularity for its cloud computing services.
Both Apple and Microsoft have enjoyed a strong run of growth lately, and both are expected to post double-digit earnings per share growth this year. However, Apple is arguably the more expensive of the two stocks regarding its market cap to projected forward earnings ratio. The Cupertino-based company trades at a P/E ratio 28, well above the tech industry average 19.
Fresh worries about smartphone demand have pushed Apple’s shares down 4% this year, but they are still up 48% in 2024 after rallying an impressive 57% last year. By contrast, the stock of Microsoft, which owns Windows software and offers various cloud computing services, is up about 2% year to date after surging 57% in 2023.
Historically, Microsoft has been a slow-burning growth story, but the company has seen a turnaround since Satya Nadella became CEO in 2014. The former Nokia executive has focused on improving the firm’s focus on business customers and revamping its hardware products.
The company has also invested heavily in new technologies like augmented reality and artificial intelligence. It recently launched its $3,499 Vision Pro headset, which is a big bet on a technology that has yet to be fully embraced by consumers.
As a result, analysts believe Microsoft will be the company to surpass Apple as the world’s most valuable company in the long run. The former computer giant has several distinct advantages over its rival, including a more diverse portfolio of offerings, and it is already the first company to reach a market cap of more than $2 trillion. However, Investors should remain cautious regarding Apple, as the latest dip in its shares could be a warning sign that the company is losing steam. Investors should also consider looking at Microsoft’s stock, which may be attractive given the current market conditions.
