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Investors see Microsoft’s stock market value leaving Apple behind

Investors see Microsoft’s stock market value leaving Apple behind

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Investors see Microsoft's stock market value leaving Apple behindv

Microsoft’s early lead in artificial intelligence has the software heavyweight’s stock market value poised to pull decisively ahead of Apple’s over the next five years, 13 institutional investors unanimously agreed ahead of the tech titans’ quarterly results this week. 

Microsoft’s shares have surged 7% so far in 2024, recently sending its stock market value above $3 trillion and dethroning Apple as the world’s most valuable company.

As of Friday, the Redmond, Washington software maker’s market capitalization was a few billion dollars above Apple.

Asked which would be more valuable five years from now, all 13 investments strategists and portfolio managers consulted by Reuters last week said they expect Microsoft to outpace Apple.

Share prices and valuations could shift this week as Microsoft reports its quarterly results on Tuesday, followed by Apple on Thursday.

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In the long term, though, all the investors consulted by Reuters said Microsoft’s recent successes in generative AI give it a powerful advantage over Apple.

Still, the race between Apple and Microsoft could turn into a race for second place, some said, citing the huge recent gains by Nvidia, whose chips have powered the AI revolution.

Microsoft made early investments in ChatGPT-maker OpenAI and is incorporating generative AI technology across its business. AI is likely to benefit Microsoft’s cloud-computing offerings as it competes with Amazon and Alphabet in that burgeoning market.

In its applications business, Outlook now offers users AI help composing emails.

Microsoft “has more levers to pull in the forms of Azure cloud, gaming, enterprise software, and of course, AI is the most compelling,” said King Lip, chief strategist at Baker Avenue Wealth Management. “Apple is most reliant on the iPhone, which is a mature market, and the company has yet to detail how it will compete in the AI arms race.”

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Apple has been quietly incorporating AI into product functions, such as snapping better iPhone photos, but investors will want to hear more AI plans when the company reports its December quarter results.

They also will be watching China, where demand for iPhones has slumped due to a slow economic recovery from the COVID-19 pandemic and as a resurgent Huawei erodes the Cupertino, California company’s market share.

Apple starts sales of its Vision Pro mixed-reality headset in the U.S. on Friday, its most expensive bet in more than a decade.

Since Steve Jobs launched the iPhone in 2007, Apple’s stock has surged more than 4,300%, helping Apple eclipse Exxon Mobil  in 2011 as Wall Street’s most valuable company and making it a cornerstone investment of portfolio managers trying to outperform the S&P 500.

With investors worried about soft demand for iPhones in China, Apple’s stock is flat so far in 2024, underperforming the S&P 500’s nearly 2.5% rise as well as the 7% surge in Microsoft shares this year.

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Microsoft’s shares also rallied 57% rally in 2023 thanks to its lead in generative AI. Its stock is now trading at 33 times expected earnings, compared a forward PE of 28 for Apple and around 20 for the S&P 500, according to LSEG.

“These are quality growth companies … but in order to warrant these valuations, they need to continue to grow at aggressive clips. You’re going to need increases in productivity, and I think Microsoft is better poised than Apple to do so,” said Mike Dickson, head of research at Horizon Investments.

Fifty Wall Street analysts recommend buying Microsoft shares, while four analysts have neutral ratings and none recommend selling, according to LSEG data.

Apple has 26 positive analyst ratings and 12 neutral ratings, while two analysts recommend selling, including a downgrade to “underweight” by Barclays this month due to worries about “lackluster” iPhone sales.

Nvidia, now the most valuable chipmaker after its shares more than tripled last year, may also be a contender for the world’s most valuable company in the next few years, said Wayne Kaufman, Chief Market analyst at Phoenix Financial Services in New York.

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After hitting record highs last week, Nvidia’s market capitalization reached over $1.5 trillion making it Wall Street’s fifth most valuable company, less than $200 billion behind Amazon.

“I have told our brokers and clients that Nvidia is like Microsoft in the early 90s and Intel in the early 80s,” Kaufman said.

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AI with reasoning power will be less predictable

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AI with reasoning power will be less predictable

Former OpenAI chief scientist Ilya Sutskever, one of the biggest names in artificial intelligence, had a prediction to make on Friday: reasoning capabilities will make the technology far less predictable.

An idea that his team had explored a decade ago, that scaling up data to “pre-train” AI systems would send them to new heights, was starting to reach its limits, he said. More data and computing power resulted in ChatGPT which OpenAI launched in 2022, to the world’s acclaim.

“But pre-training as we know it will unquestionably end,” Sutskever declared before thousands of attendees at the NeurIPS conference in Vancouver. “While computing is growing,” he said, “the data is not growing, because we have but one internet.”

Sutskever offered some ways to push the frontier despite this conundrum. He said technology itself could generate new data, or AI models could evaluate multiple answers before settling on the best response for a user, to improve accuracy. Other scientists have set sights on real-world data.

But his talk culminated in a prediction for a future of superintelligent machines that he said “obviously” await, a point with which some disagree. Sutskever this year co-founded Safe Superintelligence Inc in the aftermath of his role in Sam Altman’s short-lived ouster from OpenAI, which he said within days he regretted.

Long-in-the-works AI agents, he said, will come to fruition in that future age, have a deeper understanding, and be self-aware. He said AI will reason through problems like humans can.

From a Nobel Prize winner’s prediction to Google’s new generation quantum chip,

There’s a catch.

“The more it reasons, the more unpredictable it becomes,” he said.

Reasoning through millions of options could make any outcome non-obvious. By way of example, AlphaGo, a system built by Alphabet’s DeepMind, surprised experts of the highly complex board game with its inscrutable 37th move, on a path to defeating Lee Sedol in a match in 2016.

Sutskever said similarly, “The chess AIs, the really good ones, are unpredictable to the best human chess players.”

AI as we know it, he said, will be “radically different.”

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Data portal to help Pakistan in key sectors

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Data portal to help Pakistan in key sectors

Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal says data is more valuable than oil in today’s world.

“Data is more valuable than oil as its role in decision-making can significantly enhance productivity and drive economic and social progress,” the minister said at a symposium on Thursday.

In his keynote address at the inaugural ceremony of the two-day Data for Development (D4D) Symposium, an initiative by UNFPA, in partnership with Sustainable Development Policy Institute (SDPI) in the first year of initiative with the support of the Government of the Netherlands, Iqbal applauded the initiative and remarked that data had evolved beyond a mere tool and become a cornerstone for development and transformative change.

He highlighted that despite its potential, Pakistan faces challenges in ensuring widespread internet access, particularly in the fields of education, health, and governance.

The minister referenced a United Nations report that revealed 68pc of the Sustainable Development Goals (SDGs) rely on high-quality data. However, developing countries like Pakistan continue to struggle with data management and infrastructure, he added.

He also shared examples of how data had been effectively utilised in Pakistan, such as using satellite data to monitor glacial melt in Gilgit-Baltistan and implementing social protection initiatives like the Benazir Income Support Program (BISP) that successfully disbursed cash relief to over 2.7 million families based on data during the 2022 floods.

“We are embedding AI ethics to ensure transparency and fairness in algorithmic models,” he explained, highlighting the government’s efforts to design systems that prioritise equity and inclusivity.

Dr Luay Shabaneh, UNFPA Country Representative, Pakistan said data collection must translate into actionable knowledge, particularly in sectors like education, nutrition, and maternal health.

He called for increased openness in data collection and sharing, and greater capacity for transforming raw data into quality insights.

Ambassador Shafqat Kakakhel, Chairman SDPI Board of Governors who opened the symposium, commended the D4D initiative for strengthening government agencies’ capacities at both federal and provincial levels.

The project aims to foster a culture of evidence-based decision-making, enhance the national statistical system, and bolster data collection processes across public entities.

Ahsan Iqbal, along with others, launched Pakistan’s first D4D Portal, designed to centralise critical data on demographics, health, gender, education, and beyond.

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Canada proposed 15bn dollars incentive to boost AI green data centre investment

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Canada proposed 15bn dollars incentive to boost AI green data centre investment

Canada’s federal government has considered making up to $15 billion available as an incentive to encourage major domestic pension funds to invest in AI data centres powered by green energy, the Globe and Mail reported on Thursday.

Ottawa floated the proposal in private consultation with pension funds as part of a suite of potential measures in consideration to be included in its fall economic statement, the report added citing sources with knowledge of the discussions.

Artificial intelligence tools such as OpenAI’s ChatGPT depend on chips and energy. But a $1 trillion rush to build data centres faces constraints on planning and power globally.

Last month, utilities, power regulators and researchers in a half-dozen countries told Reuters the surprising growth in power demand driven by the rise of AI and cloud computing is being met in the near-term by fossil fuels like natural gas, and even coal, because the pace of clean-energy deployments is moving too slowly to keep up.

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