Microsoft briefly hit the US$3 trillion club – what you need to know about the tech giant’s success

Microsoft briefly crossed the US$3 trillion market value mark for the first time on Wednesday.

Microsoft briefly hit the US$3 trillion club – what you need to know about the tech giant’s success
Microsoft logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

The backstory: In the artificial intelligence (AI) race, Microsoft is taking the lead for market dominance, especially with its investment in OpenAI, the creator of ChatGPT. Last year, Microsoft's CEO, Satya Nadella, made big moves by investing billions in AI, including tools like ChatGPT, which gave Microsoft an edge over its rivals. Using OpenAI's technology, Microsoft upgraded its main products and Bing search engine to compete with Google.

On the other hand, Microsoft-rival Apple has faced challenges – lower demand in China post-COVID, increased local competition from Huawei and a dip in iPhone sales due to some reported Chinese government restrictions. Also, in December, Apple faced a temporary ban on selling its newest Apple Watch models in the US because of a lawsuit over patents.

More recently: Surprisingly, Microsoft briefly secured the position of the world's most valuable publicly traded company in January after trailing behind Apple for a decade.

The development: Microsoft briefly crossed the US$3 trillion market value mark for the first time on Wednesday, becoming the second company to do it. It stands as the world's second most valuable company, just behind Apple. The tech giant's shares reached a record high of US$405.63, marking a 1.7% increase during trading hours. Although, it didn’t hold the threshold, as it closed slightly lower at US$402.56, leaving it at the US$2.99 trillion valuation mark. The upcoming January 30 earnings report adds anticipation to Microsoft's continued success in tech and AI. On the other hand, Apple, valued at US$3.01 trillion, saw a small dip in its shares, closing at US$194.50.

Key comments: 

"There is a huge push toward generative AI and Microsoft is holding a tremendous number of the cards with its offerings," said Ted Mortonson, technology desk sector strategist at Baird. "To see a company of this size with this kind of growth is pretty amazing and I think that so long as we continue to see this kind of growth, the stock will continue to rip."

"I think it's AI optimism for Microsoft," said Stifel analyst Brad Reback, adding that Apple doesn't seem to have the same "clear AI story" coupled with concerns about iPhone sales growth rates and penetration.

“We understand that companies like Apple and Google and Meta are working on ways to monetize generative AI, but you have to admit that Microsoft right now really is the only working model where you can engage with chatGPT for a subscription,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.