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 held the title almost without interruption.
But a transfer of power has begun.
On Friday, Microsoft overtook Apple to take the crown after its market value increased by more than $1 trillion over the past year. Microsoft ended the day with $2.89 billion, higher than Apple's $2.87 billion, according to Bloomberg.
The change is part of a reordering of the stock market that was set in motion with the arrival of generative artificial intelligence. The technology, which can answer questions, create images and write code, has been heralded for its potential to disrupt businesses and create trillions of dollars in economic value.
When Apple replaced Exxon, it ushered in an era of technological supremacy. The stocks of Apple, Amazon, Facebook, Microsoft and Google eclipsed former market leaders such as Walmart, JPMorgan Chase and General Motors.
The tech industry still dominates the top of the list, but the companies with the most momentum have put generative ai at the forefront of their future business plans. The combined value of Microsoft, Nvidia and Alphabet, Google's parent company, increased by $2.5 trillion last year. Its performances eclipsed Apple, which saw a smaller share price increase in 2023.
“It just comes down to ai generation,” said Brad Reback, an analyst at investment bank Stifel. Generative ai will impact all of Microsoft's businesses, including its largest, he said, while “Apple doesn't have much of an ai story yet.”
Microsoft and Apple declined to comment.
Microsoft hasn't led a technology transition since the personal computing era, when its Windows operating system dominated sales. It was too late for the Internet, the mobile phone and social networks.
When Satya Nadella became CEO of Microsoft in 2014, the company was reeling. He refocused it on the growing business of cloud computing, making it a strong challenger to Amazon, the pioneer in the field. Nadella then pushed the company forward again, making an aggressive bet on generative ai.
In 2019, Nadella made the first of several Microsoft investments in OpenAI, the startup that would build the ai-powered chatbot ChatGPT. In late summer 2022, he was impressed by a preview of OpenAI's underlying technology, known as GPT-4, and soon began pushing Microsoft to add generative ai to its products at what he called a “frantic pace.” .
It started by adding a chatbot to the Bing search engine, but then began introducing ai into the Windows operating system and productive applications such as Excel and Outlook, and offering OpenAI systems to customers of Azure, the flagship cloud computing product. from Microsoft.
The revenue has only just begun to be reflected in Microsoft's financial results. Generative ai accounted for about 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, accusing them of copyright infringement.)
This isn't the first time Microsoft has gotten ahead of 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 this shift could be more indicative of a fundamental shift in the tech industry.
“The question is: who has the best mousetrap to get to the next level of $3.5 trillion?” said Dan Morgan, portfolio manager and analyst at Synovus Trust, a Southeast bank. “You can argue that Microsoft is in a better position. “Apple has been 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 more than 200 million.
When device sales slowed in recent years, Apple CEO Tim Cook shifted the company's focus from selling more iPhones to selling people more apps and services on their existing iPhones. The strategy helped Apple's annual revenue soar to $383 billion, nearly four times more than at the end of 2011, the year Apple co-founder Steve Jobs died.
Cook's strategy has shown signs of fatigue. The iPhone, which accounts for more than half of Apple's revenue, has become better known for its incremental improvements each year than for its notable innovations. Purchases of iPads and Macs have decreased. And sales growth for its services like Apple Music is slowing.
Last year, the company's sales fell for four consecutive quarters. But Apple shares still rose about 50 percent last year, and investors pushed its market value to nearly $3 trillion on their belief that demand for the iPhone would continue.
Wall Street analysts have predicted that iPhone sales this year will be weak. The company faces challenges in China, where Huawei launched a new phone and the government is restricting the use of foreign smartphones.
While Microsoft and others have been building new generative ai businesses, Apple has been absent from the conversation. During a call with analysts last year, Cook said Apple was working on ai, but declined to elaborate.
Last year, Apple engineers were testing a large language model that can power a chatbot, The Times reported. The company has also had conversations with publishers about acquiring material to train generative ai systems. But he hasn't published anything publicly yet.
“Apple needs to take note that if it wants to maintain its place as one of the most innovative tech companies, it needs to get behind ai in a big way,” said Gene Munster, managing partner at Deepwater Asset Management.
Apple has been focused on launching an augmented reality headset, the Vision Pro. The device, which ships on February 2, is the first major new product category the company has launched since the Apple Watch in 2014. Analysts They project that Apple will sell less than half a million units.
