For more than a decade, Apple was the undisputed king of the stock market. It first surpassed Exxon Mobil as the world’s most valuable public company in 2011 and has held the title almost uninterrupted.
But the transfer of power has already begun.
On Friday, Microsoft overtook Apple to claim the crown after its market value grew by more than $1 trillion over the past year. Microsoft ended the day at $2.89 trillion, ahead of Apple’s $2.87 trillion, according to Bloomberg.
The change is part of a stock market restructuring that was set in motion by the advent of artificial intelligence. The technology, which can answer questions, create images and write code, has been touted for its potential to disrupt businesses and create trillions of dollars in economic value.
When Apple replaced Exxon, it ushered in an era of tech hegemony. The valuations of Apple, Amazon, Facebook, Microsoft and Google dwarf former market leaders such as Walmart, JPMorgan Chase and General Motors.
The tech industry still tops the list, but the fastest growing companies have put generative AI at the forefront of their future business plans. The combined net worth of Google’s parent company Microsoft, Nvidia and Alphabet grew by $2.5 trillion last year. Their performance outperformed that of Apple, which saw less growth in share price in 2023.
“It just comes down to general AI,” said Brad Rebeck, an analyst at investment bank Stifel. Generative AI will impact all of Microsoft’s businesses, including its biggest, he said, while “Apple doesn’t have much of an AI story yet.”
Microsoft and Apple declined to comment.
Microsoft hasn’t led the technology transition since the personal computing era, when its Windows operating system dominated sales. Internet, mobile phones and social media were late.
When Satya Nadella became Microsoft’s chief executive in 2014, the company was on a roll. It refocused it on its growing cloud computing business, turning it into a strong challenger to Amazon, the pioneer in the field. Then Mr. Nadella pushed the company forward again, betting aggressively on generative AI
In 2019, Mr. Nadella made Microsoft’s first investment in OpenAI, the startup that will build the AI-powered ChatGPT chatbot. In the late summer of 2022, he was impressed by a preview of OpenAI’s core technology, known as GPT-4, and soon encouraged Microsoft to include generative AI in its products. began what he called “frantic peace”.
It started with adding a chatbot to the Bing search engine, but then moved on to push AI into the Windows operating system and into productivity applications like Excel and Outlook, and introduced OpenAI to users of Microsoft’s flagship cloud computing product Azure. systems offered.
The revenue is just beginning to show up in Microsoft’s financial results. Generative AI accounted for nearly three percentage points of Azure growth in the three months ending in September, and the $30-a-month offering within Microsoft’s productivity software only began general release in November.
(The New York Times has sued OpenAI and Microsoft, alleging copyright infringement.)
This is not the first time that Microsoft has overtaken Apple in recent years. It did so in 2018, when its cloud computing business began to flourish, and in 2021, when the pandemic disrupted Apple’s iPhone operations. But the shift may be more indicative of a fundamental shift in the tech industry.
The question is, who has the better mousetrap to get to the next level of $3.5 trillion? said Dan Morgan, portfolio manager and analyst at Synovus Trust, a bank in the Southeast. “You can make the case that Microsoft is in a better position. Apple is fighting for the next big thing.
The iPhone, which debuted in 2007, catapulted Apple to the top of the stock market. Between 2009 and 2015, the company went from selling 20 million iPhones a year to over 200 million.
When device sales declined in recent years, Apple Chief Executive Tim Cook shifted the company’s focus from selling more iPhones to selling people more apps and services on their existing iPhones. This strategy helped Apple grow its annual revenue to $383 billion, a nearly four-fold increase from the end of 2011, the year Apple co-founder Steve Jobs died.
Mr Cook’s strategy has shown signs of fatigue. The iPhone, which accounts for more than half of Apple’s revenue, is known more for its incremental improvements than its notable innovations each year. iPad and Mac purchases have declined. And sales growth for its services like Apple Music is slowing.
Last year, the company’s sales fell for four consecutive quarters. But Apple’s shares still rose nearly 50 percent last year, and investors have pushed its market value to about $3 trillion because they believe demand for the iPhone will continue.
Wall Street analysts predict that iPhone sales will remain weak this year. The company faces challenges in China, where Huawei has released a new phone and the government is banning the use of foreign smartphones.
While Microsoft and others are building innovative AI businesses, Apple is missing from the conversation. During a call with analysts last year, Mr. Cook said Apple’s AI-related work was “ongoing,” but declined to elaborate.
Last year, Apple engineers were testing a larger language model, which could power a chatbot, the Times reported. The company has also held discussions with publishers about acquiring content to train generative AI systems. But he hasn’t released anything publicly yet.
“Apple needs to realize that if it wants to maintain its position as one of the most innovative tech companies, it has to get behind AI in a big way,” said Jane Munster, managing partner at Deepwater Asset Management. Gotta go.”
Apple has focused on launching an augmented reality headset, the Vision Pro. The device, which will ship on February 2, is the first major new product category the company has released since the Apple Watch in 2014. Analysts believe Apple will sell less than half a million units.