Microsoft temporarily surpassed Apple in market valuation, signalling a shift in the tech industry landscape. Microsoft’s stock closed 0.5% higher, reaching a market capitalisation of $2.859 trillion, while Apple closed 0.3% lower at $2.886 trillion. This momentary shift follows Microsoft’s significant strides in generative AI through its investment in OpenAI, the creator of ChatGPT.

Analysts attribute Microsoft’s growth to its rapid expansion and strategic adoption of OpenAI’s technology across its productivity software suite. The generative AI revolution has propelled Microsoft’s cloud-computing business, contributing to its impressive market performance.

One of the key drivers behind Microsoft’s surge can be attributed to the company’s flagship AI product, Copilot for Microsoft 365.

In contrast, Apple is grappling with weakening demand, particularly for the iPhone, its primary revenue source. Economic challenges in China, a vital market for Apple, coupled with competition from Huawei, have led to a decline in market share and performance concerns. Several analysts have lowered their ratings for Apple in 2024, citing potential challenges in the coming years.

Foxconn, the Chinese assembler of Apple’s iPhones, reported a year-over-year revenue decline, further adding to the concerns. The New York Times has also reported that the U.S. Department of Justice is working on an antitrust case against Apple, which is expected to materialise later this year.

The stock performance comparison reveals a 3.3% decline in Apple’s shares in January, contrasting with Microsoft’s 1.8% rise during the same period. Both companies, however, are trading at relatively high share price-to-earnings (PE) ratios. Apple’s forward PE of 28 is well above its 10-year average of 19, while Microsoft’s forward PE is 31, exceeding its 10-year average of 24.

This is not the first time Microsoft has surpassed Apple in market value, having done so in 2021, 2020, and 2018 as well.