Microsoft might surpass Apple as world's largest stock: Here's why
Investors are closely monitoring Microsoft's recent surge in stock market performance, which has brought it closer to Apple. Microsoft's shares have outpaced Apple's in recent weeks, narrowing the gap in market value between the two tech giants. This development is significant given the ongoing tensions between Apple and China. While there remains a notable difference in market capitalization, Microsoft's dominance in areas like cloud computing and artificial intelligence is making it an appealing choice for investors.
Microsoft's strengths and attractiveness
According to David Klink, a senior equity analyst at Huntington Private Bank, Microsoft possesses attributes that align more closely with current market demands. The company's strengths lie in its robust margins, as well as its prominent positions in growth areas like cloud computing and artificial intelligence, which are expected to thrive over the next decade. In contrast, there is uncertainty surrounding the sustainability of Apple's growth, particularly in comparison to Microsoft's promising prospects.
Wall Street's preference for Microsoft
Wall Street seems to favor Microsoft over Apple, with a notable majority of analysts recommending buying Microsoft shares, in contrast to Apple, where a smaller proportion of analysts recommend buying the stock. This preference reflects confidence in Microsoft's growth potential and its ability to outperform Apple in the coming years. On Tuesday, Microsoft's shares experienced a 0.12% decline, while Apple saw a modest 0.07% dip. The NASDAQ 100 Index registered a 0.22% decrease.
Apple's Challenges
Apple faces its own set of challenges, having recently experienced three consecutive quarters of negative revenue growth. If this trend continues for a fourth quarter, it would mark the longest such streak in two decades for the company. Although analysts anticipate a return to positive growth in Apple's 2024 fiscal year and the following two years, the pace of growth is expected to be significantly lower than that of Microsoft, according to data compiled by Bloomberg.
The AI factor
Artificial intelligence (AI) is emerging as a dominant investment theme, and Apple's position in this landscape has raised concerns. Some experts believe that Apple may lose ground to companies like Microsoft, Alphabet, and Amazon due to its perceived lack of emphasis on generative AI. Moreover, NVIDIA, a leading player in AI technologies, is seen as a potential threat to Apple's dominance, despite being smaller in size.
Apple's recent developments and risks
Apple's recent product reveals, although generating interest, lacked major surprises. Apple's efforts in developing in-house chips might be facing delays, which could potentially affect its product launch timelines. Moreover, the introduction of a new phone by Huawei presents a competitive challenge, particularly amid worries about governmental limitations on iPhones in China, a crucial market for Apple's earnings. In contrast, Microsoft's minimal reliance on China, representing less than 2% of its revenue, provides a sense of stability amidst uncertainty.
