Silicon Valley Showdown: Microsoft nips at Apple's crown as world's most valuable company

Silicon Valley giants Apple and Microsoft are locked in a tight race for the title of world's most valuable company, with recent market shifts putting Microsoft within striking distance.

This is based on a Reuters report.

Apple's crown has grown unsteady, weighed down by declining iPhone sales in China and analysts doubts about the impact of its upcoming mixed-reality headset. Its shares have dipped 4 per cent this year, eroding its market capitalisation to $2.866 trillion.

Add WION as a Preferred Source

Microsoft, on the other hand, is riding a wave of success, with its stock price up 2 per cent year-to-date and market value hitting $2.837 trillion. This surge is fuelled by the continued strength of its cloud computing business, Azure.

The gap between the two tech titans is narrow, with Apple clinging to a mere $29 billion lead. In December, the gap was even smaller.

Apple's iPhone performance, particularly in China, is a major concern. Jefferies analysts reported a 30 per cent drop in iPhone sales in China during the first week of 2024, raising fears about growing competition from Huawei and other domestic players.

While Apple's upcoming Vision Pro headset launch is its biggest product reveal since the iPhone, analysts at UBS doubt its immediate impact on earnings. They predict its contribution to be "relatively immaterial" in 2024.

This isn't the first time Microsoft has threatened Apple's top spot. Since 2018, they have briefly exchanged positions several times, including in 2021 when COVID-related supply chain issues hit Apple hard.

Both companies currently trade at relatively high valuations compared to their expected earnings. Apple's forward price-to-earnings ratio is at 28, significantly above its historical average of 19. Microsoft fares slightly better at 31, still surpassing its 10-year average of 24.

Apple's recent quarterly report offered a lukewarm outlook for the holiday season, missing Wall Street expectations due to weak demand for iPads and wearables. Analysts still anticipate a meagre 0.7 per cent revenue increase for the December quarter, marking the first year-on-year increase in four quarters. Apple's official results are due on February 1st.

Microsoft, on the other hand, is expected to report a 16 per cent revenue increase to $61.1 billion in the coming weeks, driven by the robust performance of Azure.

(With inputs from Reuters)