Microsoft Takes Lead in AI Race, Aiming to Surpass Apple’s Market Value in the Next Five Years
In a unanimous consensus among 13 institutional investors, Microsoft is anticipated to outpace Apple in stock market value over the next five years, riding on its early strides in artificial intelligence (AI). Microsoft’s shares (MSFT.O) have already soared 7% in 2024, propelling its market value beyond $3 trillion and surpassing Apple (AAPL.O) as the world’s most valuable company.
As of Friday, Microsoft’s market capitalization slightly edged past Apple’s, marking a potential turning point in the ongoing rivalry. Industry experts consulted by Reuters predict that Microsoft’s recent advancements in generative AI provide a significant advantage over Apple in the long term.
The upcoming quarterly results announcements from both tech giants this week could sway share prices and valuations. However, the consensus remains that Microsoft’s strategic investments in AI, including collaborations with OpenAI, position it favorably in comparison to Apple. Microsoft’s foray into AI extends across its cloud-computing offerings, gaming, and enterprise software, providing a diverse portfolio of growth levers.
On the other hand, Apple, heavily reliant on iPhone sales, faces challenges in a mature market. Despite incorporating AI into product functionalities like camera enhancements, Apple’s strategy in the AI landscape is yet to be fully revealed. The company’s sales in China have also been affected by economic challenges and increased competition, particularly from resurging Huawei.
As Apple explores new frontiers with the launch of its Vision Pro mixed-reality headset, Microsoft’s lead in AI and diversified business segments appears to give it a competitive edge. Microsoft’s 57% rally in 2023 and the current trading at 33 times expected earnings underline the confidence investors place in the company’s growth trajectory.
Analysts highlight the need for these tech giants to sustain aggressive growth to justify their valuations. Microsoft, with its broad range of offerings and strong position in AI, is viewed by many as better poised for future growth compared to Apple. Wall Street currently exhibits strong confidence in Microsoft, with fifty analysts recommending buying its shares.
Meanwhile, Nvidia emerges as a formidable player, with its market capitalization surpassing $1.5 trillion. Some analysts even speculate that Nvidia could contend for the title of the world’s most valuable company in the coming years, drawing parallels to Microsoft in the early ’90s and Intel in the early ’80s. As the tech landscape evolves, the competition for the top spot continues to intensify, with investors closely monitoring each company’s strategic moves and financial performance.