Microsoft on Thursday has briefly passed Apple’s market cap as the world’s most valuable public company since 2021.
The iPhone maker’s shares made a weak start to the year on growing concerns over smartphone demand and a recent U.S. sales ban on the latest Apple Watch following a patent dispute.
Meanwhile, Microsoft’s shares have risen sharply since last year due to its partnership with OpenAI, the creator of generative artificial intelligence interface ChatGPT.
Microsoft’s stock closed 0.5 percent higher, giving it a market valuation of $2.859 trillion. It rose as much as 2 percent during the session and the company was briefly worth $2.903 trillion.
Shares of Apple closed 0.3 percent lower, giving the company a market capitalization of $2.886 trillion.
“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.
Microsoft has incorporated OpenAI’s technology across its suite of productivity software, a move that helped spark a rebound in its cloud-computing business in the July-September quarter.
The Redmond, Washington-based company last year has committed to invest over $10 billion into OpenAI with a non-voting position on the board.
At the same time, Apple has been facing concerns over weakening demand for its iPhone sales. Demand in China, a major market for Apple, has declined as the country’s economy makes a slow recovery from the pandemic and a resurgent Huawei chips away at its market share.
“China could be a drag on performance over the coming years,” brokerage Redburn Atlantic said in a client note on Wednesday, downgrading Apple’s shares to “neutral” from “buy.”
Apple is pinning its hopes on the upcoming launch of the mixed-reality headset Vision pro in February. However, expectations are relatively low due to low sales forecast and high price point, according to MacRumors.
Shares of the Cupertino, California-based company have fallen 3.3 percent in January as of the last close, compared with a 1.8 percent rise in Microsoft.
Both stocks are expensive in terms of their share price-to-earnings (P/E) ratio, a common method of valuing publicly listed companies.
Apple is trading at a forward P/E of 28, well above its average of 19 over the past 10 years, according to LSEG data.
Microsoft is trading around 31 times forward earnings, above its 10-year average of 24.
Shares of Apple, whose market capitalization peaked at $3.081 trillion on Dec. 14, ended last year with a gain of 48 percent. That was lower than the 57 percent rise posted by Microsoft.
Microsoft has briefly taken the lead over Apple as the most valuable company a handful of times since 2018, including in 2021 when concerns about COVID-driven supply chain shortages hit the iPhone maker’s stock price.
Despite its growth, Microsoft and OpenAI have been hit with multiple lawsuits over AI training. In late December, The New York Times filed a copyright infringement lawsuit against Microsoft and OpenAI, accusing them of using the newspaper company’s content without permission to help train chatbots to provide information to readers. More recently, nonfiction writers sue Microsoft and OpenAI for allegedly using their work to train the ChatGPT tool without consent.
