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Tech Upheaval: Apple Yields Its Throne as the World's Most Valuable Company to Surging Competitors
Software giant Microsoft has surpassed Apple to claim the title of the world's largest company by market value, the media has reported. This shift in dominance is attributed to the surge in artificial intelligence (AI), introducing a new dimension to the enduring rivalry between these two major tech giants.
The software company witnessed a 1 per cent rise in its shares, reaching a market value of $2.87 trillion, surpassing the iPhone maker. Meanwhile, the latter experienced a nearly 1 per cent decline in its shares.
The iPhone maker's shares began to weaken in 2024 on Wednesday, overtaking Apple as the world's most valuable company amid growing demand concerns.
Shares of Redmond, Washington-based Microsoft were last up 1.6%, valuing its market at $2.875 billion as the first runner-up in the race for funding through generative artificial intelligence helped pull it together the treasurer.
Apple was down 0.9% with a market cap of $2.871 billion - the first time since 2021 that Microsoft has underestimated it.
The Cupertino, Calif.-based company fell 3.3% in January through the end of last year, while Microsoft rose 1.8%.
The Tech Titans Take the Lead:
It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," said D.A. Davidson analyst Gil Luria.
The weakness in Apple stock follows a series of rating downgrades that 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-U.S. tensions that have increased pressure on Apple.
Apple's Challenges:
As a brokerage, Apple's services business a bright spot in recent quarters faces threats as regulators deepen their investigation into a lucrative deal that makes Google the default search engine on iOS.
Shares of Apple, whose market cap reached $3.081 billion on Dec. 14 ended last year with a gain of 48%.
That's less than a 57% increase from Microsoft, which is accelerating genAI-powered tools by 2023 thanks to a relationship with ChatGPT maker OpenAI.
Microsoft has briefly overtaken Apple as the most valuable company since 2018, as recently as 2021 when the iPhone maker’s stock price was hit by the COVID-related supply crisis.
Currently, Wall Street is more positive about Microsoft. The company does not have a "sell" rating and about 90% of brokers who cover the company recommend buying the stock.
Apple has two "sell" ratings and only two-thirds of analysts who cover the company rate it a "buy."
Both stocks appear relatively overvalued in terms of expected earnings prices, a common method of valuing publicly listed companies.
Apple is trading at a forward PE of 28, well above its average of 19 over the past 10 years, according to LSEG data. Microsoft is trading at forward earnings 31 times above its 10-year 24 average.
Conclusion:
The dethroning of Apple as the world's most valuable firm signals a significant shift in the global business hierarchy. As other tech giants rise to prominence, Apple faces the challenge of adapting to a changing landscape while continuing to innovate and capture the imagination of consumers.