Microsoft Corp. (NASDAQ: MSFT | MSFT Price Prediction) shares have had a bad year, but Apple Inc. (NASDAQ: AAPL) shares have suffered more. That has made Microsoft the world’s most valuable company, displacing Apple’s multimonth period at the top.
Microsoft stock has dropped 16% this year, about the same as the S&P 500, while Apple stock plunged 31% over the same period. That puts Microsoft’s market cap at $2.66 trillion and Apple’s at $2.59 trillion.
Apple’s decline is based almost entirely on one anxiety. Although it assembles some iPhones in India, it makes about 85% of its iPhones in China. Apple has started to shift production out of Chinese factories. In the meantime though, it has to deal with China tariffs that have reached 104%.
Apple often points to its gross margins as one of its strengths. The figure comes from revenue less than the cost of sales and runs at about 47%. If that number drops, Apple’s net income and per-share earnings shrink.
Microsoft’s stock falloff is based on a strategic decision. It said it aimed to invest $80 billion in artificial intelligence (AI) infrastructure this year. Investors worry that AI revenue will not grow quickly enough to justify that investment. Anxiety comes largely from huge competition from Amazon, Meta, Alphabet, OpenAI, xAI, and many smaller AI operations. Some investors believe that Microsoft has no “moat” around this business, so its money-making ability from AI is risky.
Microsoft’s share price is also under pressure from a slowdown in its cloud computing business, which has been critical to its growth in recent quarters. Whether this is because of competition or a worldwide slowing in the cloud business is unclear.
If Apple’s manufacturing costs show up in earnings or guidance, it may have permanently lost its market cap lead.
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