Microsoft Is the Most Valuable Public Company, Thanks to GenAI. But Will It Last?

Microsoft has reclaimed its position as the world’s most valuable public company in 2024, surpassing its long-time rival Apple.

As of January 17, 2024, Microsoft’s market capitalization has soared to $2.90 trillion, marginally eclipsing Apple’s $2.84 trillion. This achievement is largely attributed to the company’s strategic focus and advancements in generative AI, a sector that has seen burgeoning growth and investor interest in recent years.

AAPL vs. MSFT, 1-year Market Cap Chart

AAPL vs. MSFT market capitalization

Source: TradingView

But can the company maintain this momentum? Let’s take a closer look at the drivers behind its recent success.

Key Takeaways

  • Under CEO Satya Nadella, Microsoft refocused on cloud computing and generative AI, overtaking Apple as the most valuable public company in 2024.
  • The company’s success is bolstered by its early investments in genAI and a strategic partnership with OpenAI, allowing it to integrate AI into its key products.
  • Microsoft’s rise was also aided by Apple’s struggles, including competitive pressures from Chinese tech companies and the downsizing of its AI team in San Diego.
  • Microsoft’s strategic investments in genAI are set to drive future growth, leveraging a technology projected to significantly boost the global GDP over the decade.

The Rise of Microsoft in the AI Arena

When Satya Nadella assumed the role of CEO at Microsoft in 2014, he inherited a company grappling with challenges and in need of a new direction. Recognizing the potential of the cloud computing market, Nadella steered the tech giant towards this domain, positioning it as a formidable rival to Amazon, the early leader in cloud services.

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Nadella would later reflect on this pivotal shift:

“We saw the future in the cloud, and we seized it.”

The transformative journey didn’t stop there. In 2019, Microsoft made a strategic investment in OpenAI, a move that marked the company’s foray into the realm of generative AI. Nadella, impressed by a preview of OpenAI’s GPT-4 technology in 2022, urged a rapid integration of generative AI into Microsoft’s product lineup.

The company has integrated AI capabilities across its suite of products and services, significantly enhancing consumer and enterprise offerings. This move has resonated well with both users and investors, contributing to its soaring market value, which reached $2.87 trillion as of early January 2024.

A key example of Microsoft’s AI integration is its Copilot feature, an AI assistant for Microsoft 365 applications. Built into the Windows 11 operating system, Copilot represents a blend of convenience, security, and compliance tailored for the modern workspace.

Furthermore, Microsoft’s collaboration with OpenAI and its significant stake in the company emphasize its commitment to genAI.

Microsoft’s AI strategy and its innovations in generative AI were highlighted across several key conferences in 2023. These events, where Microsoft either owns or co-owns AI intellectual property, provided deep insights into the latest AI advancements and their potential applications.

OpenAI DevDay

  • Held in San Francisco on November 6, 2023, this developer conference by OpenAI, in which Microsoft holds a significant stake, showcased numerous AI innovations.
  • Major announcements included the launch of GPT-4 Turbo, Assistants API, Custom GPTs and the GPT Store, Custom Models, and the DALL-E 3 API.
  • For a comprehensive summary of the announcements, visit OpenAI’s blog.

GitHub Universe

Microsoft Ignite

  • This event showcased Microsoft’s latest AI, data, and cloud technologies.
  • Highlights included the announcement of Microsoft’s first AI chip, Athena, expanded partnerships with AMD and NVIDIA, the launch of Windows AI Studio, and updates to Azure AI services.
  • Copilot for Microsoft 365, an AI-driven assistant, was also showcased for its potential to enhance productivity.

Will Microsoft Remain #1 Amid Fierce Market Competition?

The ascension of Microsoft in market value can also be partly attributed to the challenges faced by Apple. Apple’s recent stock performance has been underwhelming due to competitive pressures, especially from Chinese tech companies. This situation, combined with Microsoft’s AI-driven growth, has contributed to the shift in market valuations between the two tech giants.

Analysts from Piper Sandler expressed optimism about Microsoft’s AI trajectory, stating:

“We are encouraged by the momentum around the most mature AI products.”

They highlighted the consistent growth in GitHub website traffic and maintained a strong buy rating on Microsoft shares.

Adding to the challenges faced by Apple, the company has recently decided to shutter its 121-person AI team in San Diego. This move, which involves relocating key Siri data operations, places additional pressure on the tech giant and contributes to the changing dynamics in its competition with Microsoft.

Looking ahead, Microsoft’s focus on generative AI is expected to continue driving its growth and market value. The company’s journey under Nadella’s stewardship, from focusing on cloud computing to embracing generative AI, illustrates a company not just adapting to change but leading it.

With generative AI predicted to add nearly $10 trillion to the global GDP over the next decade, Microsoft’s early and strategic investments in this domain are likely to yield significant dividends.

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Aayush Mittal

Aayush Mittal is a software engineer with an expertise in AI and Machine Learning. Over the last five years, he has delved deeply into diverse software engineering projects, with a special focus on Natural Language Processing. Aayush combines his engineering skills with a passion for writing to demystify the complex world of technology through his insightful and informative content.