On Wednesday, Microsoft achieved a significant milestone as its stock market value surpassed the $3 trillion mark for the first time, solidifying its position as the world’s second most valuable company, closely trailing Apple.
The ongoing competition between Microsoft and Apple for the title of the most capitalized stock on Wall Street has been a focal point since the beginning of the year. In January, Microsoft briefly claimed the top spot before relinquishing it back to Apple.
Microsoft’s shares reached a record high of $405.63, marking a 1.7% increase that propelled the company past the $3 trillion market capitalization threshold. However, by market close, the shares settled at $402.56, leaving Microsoft’s valuation slightly below $3 trillion at $2.99 trillion. Meanwhile, Apple experienced a slight dip in its shares, closing down 0.35% at $194.50, but maintaining its $3 trillion market value, according to data from LSEG.
One key factor contributing to Microsoft’s robust performance is its strategic investment in OpenAI, the creator of ChatGPT. This has positioned Microsoft as a frontrunner in the race for market dominance in generative artificial intelligence (AI), competing with other tech giants such as Google’s Alphabet, Amazon, Oracle, and Meta Platforms (formerly Facebook).
Leveraging OpenAI’s technology, Microsoft has introduced new iterations of its flagship productivity software and enhanced its Bing search engine to better rival Google’s dominant search offering.
Conversely, Apple is grappling with slowing demand for its iPhones, particularly in the competitive Chinese market. To stimulate sales, the company is resorting to rare discounts in the face of strong competition from local brands like Huawei.
Analyst Brad Reback from Stifel attributes Microsoft’s success to “AI optimism,” highlighting the company’s clear AI strategy. In contrast, Apple faces concerns regarding iPhone sales growth rates and penetration, lacking a similarly defined AI narrative.
According to LSEG data, the 54 analysts covering Microsoft’s stock have a median price target of $425, reflecting a positive trend from the previous month’s target of $415. The consensus among analysts is a “buy” recommendation.
Fueled by AI optimism, Microsoft shares experienced a remarkable 57% surge in 2023 and have risen by 7% in the current year. Comparatively, Apple’s stock witnessed a 48% increase last year and a marginal 1% uptick year-to-date.
As Wall Street braces for upcoming earnings reports, the performance of mega-cap U.S. technology-related companies, including Microsoft and Apple, will be closely scrutinized.