Image Courtesy – Macrumours

Concerns regarding smartphone demand have caused a 3% decline in Apple’s shares in 2024, following a remarkable 48% surge the previous year. In contrast, Microsoft has experienced a 3% increase year-to-date after a 57% surge in 2023, driven partly by its significant investment in generative artificial intelligence, particularly in the development of ChatGPT by OpenAI.

As of December 14, Apple’s market capitalization reached its peak at $3.081 trillion, according to LSEG.

Microsoft has strategically integrated OpenAI’s technology into its suite of productivity software, contributing to a recovery in its cloud-computing business during the July-September quarter. This AI advantage has also positioned Microsoft to challenge Google’s dominance in web search.

Brief analysis on the tap-dance between Apple and Microsoft

The technological landscape is marked by the robust competition between two industry titans, Apple and Microsoft, each carving its niche in distinct sectors of the market.

Beginning with operating systems, Microsoft’s Windows and Apple’s macOS command prominence, catering to disparate user bases. While Windows asserts dominance in the PC realm, macOS distinguishes itself through seamless integration with Apple’s hardware, delivering an unparalleled user experience.

In the realm of smartphones and tablets, Apple’s iPhone and iPad have set industry benchmarks, known for their tightly integrated ecosystem. Conversely, Microsoft faces challenges in the smartphone arena but makes noteworthy strides with its Surface devices and Windows tablets.

Cloud services form another battleground, where Microsoft’s Azure competes head-to-head with Apple’s iCloud. While both leverage cloud services, Microsoft’s forte lies in enterprise cloud computing, extending beyond mere storage to encompass services like Azure AI and Microsoft 365.

Productivity software sees Microsoft’s Office suite, featuring Word, Excel, and PowerPoint, as a ubiquitous presence in both consumer and enterprise domains. On the other hand, Apple competes, particularly in the consumer market, with its iWork suite.

Artificial Intelligence (AI) is a pivotal arena, with Microsoft making substantial investments and leveraging technologies like OpenAI’s ChatGPT. Apple, too, integrates AI into its products, emphasizing user experience and privacy as key focal points.

Turning to wearables and services, Apple’s offerings, such as the Apple Watch and AirPods, enjoy widespread popularity. While Microsoft may not hold a dominant position, it expands its service repertoire with Surface Earbuds, Xbox Game Pass, and Microsoft 365.

In terms of market capitalization and financials, Apple consistently boasts one of the highest global market capitalizations, propelled by the success of its diverse product and service portfolio. Microsoft, equally financially robust, distinguishes itself with a fierce presence in the highly competitive cloud computing space.

In essence, the rivalry between Apple and Microsoft unfolds across diverse technological domains. Their strategies, strengths, and innovations propel this competition across hardware, software, cloud services, and emerging technologies like artificial intelligence. As both companies continually adapt to the evolving technological landscape, their dynamic interplay shapes the future trajectory of the tech industry.

What does the future hold for these 2 companies?

On several occasions since 2018, Microsoft has briefly overtaken Apple as the most valuable company, with the latest instance occurring in 2021. This shift was driven by concerns about supply chain shortages stemming from the COVID-19 pandemic, impacting Apple’s stock price.

Examining their valuations through the lens of price to expected earnings, a common metric for assessing publicly listed companies, both tech giants appear relatively expensive. Apple’s forward Price-to-Earnings (PE) ratio stands at 28, significantly surpassing its 10-year average of 19, as per LSEG data. Meanwhile, Microsoft is trading at approximately 32 times forward earnings, exceeding its 10-year average of 24.

In its most recent quarterly report released in November, Apple provided a sales forecast for the holiday quarter that fell short of Wall Street expectations, influenced by sluggish demand for iPads and wearables.

As analysts project, Apple is anticipated to post a modest 0.7% revenue increase to $117.9 billion for the December quarter, marking its first year-on-year revenue growth in four quarters. Apple is set to announce its results on Feb. 1.

Contrastingly, analysts foresee Microsoft reporting a substantial 16% revenue surge to $61.1 billion in the upcoming weeks. This growth is expected to be driven by the continued expansion of its cloud business, as per market expectations.

AI, China and Big Tech

In the previous year, China marked a significant milestone by introducing its inaugural operating system, posing a potential threat to industry stalwarts Microsoft and Apple. This open-source OS, named OpenKylin, aims to reduce dependence on American technology. Leveraging the foundation of the established Linux-based Open Source OS, the collaborative efforts of a 4000-strong community have brought forth a promising Chinese operating system, poised for integration into the space program and major industries.

With China boasting a colossal tech market, the advent of a domestically developed system like OpenKylin holds the potential to inflict substantial impact on the United States. According to Chinese state media, the market’s estimated worth is $2.1 billion, and there are no indications of a decline in the foreseeable future.

In pursuit of technological independence from the USA, China’s endeavors take on added significance. Achieving autonomy in technology not only stands to generate billions but also sends a resounding global message. The dominance of Windows and MAC OS as the global operating systems may face a challenge if China succeeds in creating a user-friendly alternative for the masses. Rather than posing an existential threat, such a development could prompt established players to reevaluate their strategies in response to newfound competition.