Microsoft surpasses Apple as world's most valuable firm

Microsoft's stock market value on Friday ended a trading session higher than Apple's for the first time since 2021, making it the world's most valuable company as worries about demand hit the iPhone maker's shares.

Apple crept up 0.2% on Friday, while Microsoft added 1%. With that, Microsoft's market capitalisation stood at $2.887 trillion, its highest ever, according to London Stock Exchange Group (LSEG) data.

Apple's shares have dropped 3% in 2024 due to concerns about smartphone demand, despite a 48% rally in 2023. Microsoft's shares have increased by about 3%, driven by its investment in OpenAI.

Microsoft has incorporated OpenAI's technology across its suite of productivity software, a move that helped spark a rebound in its cloud-computing business in the July-September quarter.

Its AI lead has also created an opportunity to challenge Google's dominance of web search.

Apple faces tepid demand, particularly for its iPhone, due to China's slow recovery from the COVID-19 pandemic and Huawei's resurgence.

Microsoft has briefly surpassed Apple as the most valuable company since 2018, with concerns about supply chain shortages in 2021 impacting the iPhone maker's stock price.

Apple and Microsoft are both trading at high prices relative to their expected earnings, indicating a high valuation of the companies. Apple's forward PE is 28, above its 10-year average of 19, while Microsoft's PE is 32 times, above its 10-year average of 24.

In its most recent quarterly report in November, Apple gave a sales forecast for the holiday quarter that missed Wall Street expectations, hurt by weak demand for iPads and wearables.

Analysts predict Apple's revenue to increase by 0.7% to $117.9 billion in the December quarter, marking its first year-on-year increase in four quarters.

Meanwhile, Microsoft is expected to report a 16% increase to $61.1 billion, driven by continued growth in its cloud business.