In a noteworthy development, Microsoft Corp. is steadily narrowing the gap with Apple Inc. in the stock market, according to a recent analysis. Investors are increasingly gravitating toward Microsoft due to its promising growth prospects and lower exposure to China-related risks compared to its tech rival. Over the past month, Microsoft’s stock performance has outpaced that of Apple, resulting in a convergence of the two tech giants’ market values. While a significant difference in their market capitalizations persists, Microsoft’s robust presence in burgeoning sectors like cloud computing and artificial intelligence has captured the attention of investors.

David Klink, Senior Equity Analyst at Huntington Private Bank, pointed out that Microsoft currently possesses more of what the market desires. He expressed confidence in Microsoft’s future growth potential and wouldn’t be surprised if it eventually outperforms Apple. On Tuesday, September 19th, Microsoft shares experienced a marginal decline of 0.6%, while Apple shares dipped by 0.1%. Simultaneously, the Nasdaq 100 index recorded a 0.6% drop.

The last time Microsoft surpassed Apple in market capitalization was in November 2021. Although Apple’s current market value hovers around $2.8 trillion (down from its peak of nearly $3.1 trillion), it still stands higher than Microsoft’s $2.4 trillion valuation. This growing preference for Microsoft over Apple is not uncommon on Wall Street. Analyst consensus leans toward a stronger recommendation for buying Microsoft stock compared to Apple stock. Approximately 90% of analysts favor buying Microsoft shares, whereas less than two-thirds advocate for buying Apple shares.

While neither company appears particularly undervalued at present, many believe that Microsoft’s growth potential justifies its valuation of 29 times estimated earnings. Analysts anticipate double-digit revenue and net earnings per share growth for Microsoft in fiscal 2024 and the subsequent years, largely propelled by its robust performance in cloud computing and its investment in OpenAI, a rapidly growing startup behind ChatGPT.

In contrast, Apple has encountered three consecutive quarters of negative revenue growth. Although analysts predict a turnaround in Apple’s fiscal 2024, its growth rate is not expected to match Microsoft’s vigor.

Analyst Toni Sacconaghi from Bernstein drew parallels between Apple and the old IBM, noting that both companies were once regarded as invulnerable market leaders. Sacconaghi cautioned that Apple’s primary risk lies in the potential replacement of the iPhone by a new computing or internet access platform. He also highlighted that Apple may not benefit as significantly from generative artificial intelligence (AI) trends compared to tech giants like Microsoft, Alphabet Inc., and Amazon.com Inc.