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Apple (AAPL) currently has the largest market cap of any company in the world, with Microsoft (MSFT) a close second. Microsoft's shares have outperformed Apple shares recently as investors see better growth prospects and far less China risk in Microsoft than Apple. Microsoft gets less than 2% of its revenue from China, compared to about 20% for Apple. Also, Microsoft’s position in markets, including artificial intelligence (AI) and cloud computing, makes the stock more attractive to some investors than Apple.
Apple’s market cap currently stands near $2.8 trillion, down from a peak of nearly $3.1 trillion but still above Microsoft’s $2.4 trillion. While the price of Apple’s shares have declined this month, shares of Microsoft have held steady, narrowing the gap between the two companies to about $200 billion. Microsoft’s market value was last larger than Apple’s in November 2021.
Some analysts believe Microsoft can overtake Apple as the world’s highest-valued company. Huntington Private Bank said, “Microsoft has more of what the market wants right now, and given where we stand on the pair’s growth prospects, we wouldn’t be surprised to see it overtake Apple. We have more faith in Microsoft’s margins, given the cloud and AI are growth areas that can stand the test of time over a decade. We don’t know if the iPhone can do the same.”
Analyst ratings currently favor Microsoft over Apple. Microsoft’s recommendation consensus, a proxy for its ratio of buy, hold, and sell ratings, stands well above Apple’s. Almost 90% of Microsoft analysts recommend buying the stock, compared to only 65% for Apple. Microsoft is expected to see double-digit growth in revenue and net earnings per share in fiscal 2024 and in the three years after due to the strength of its cloud business and its backing of OpenAI, the fast-growing startup behind ChatGPT.
According to Bloomberg data, Apple is expected to post positive revenue growth in fiscal 2024 and continue growing in the subsequent two years. However, the growth rate isn’t expected to be nearly as robust as that of Microsoft. Needham & Co recently wrote that with AI becoming the hottest investment theme, Apple could fall to fourth place among U.S. stocks behind Microsoft, Alphabet (GOOGL), and Amazon.com (AMZN). Also, Bernstein said Apple is “looking like the old IBM,” and Rosenblatt Securities said Apple’s crown as the highest-valued company could be threatened by Nvidia (NVDA), which has been the biggest beneficiary of the AI boom so far, and which is currently less than half of Apple’s size.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
