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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.

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

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.

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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.”

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.

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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.

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.

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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.

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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A former OpenAI leader says safety has ‘taken a backseat to shiny products’ at the AI company

A former OpenAI leader says safety has ‘taken a backseat to shiny products’ at the AI company

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A former OpenAI leader says safety has 'taken a backseat to shiny products' at the AI company

A former OpenAI leader who resigned from the company earlier this week said Friday that safety has “taken a backseat to shiny products” at the influential artificial intelligence company.

Jan Leike, who ran OpenAI’s “Superalignment” team alongside a company co-founder who also resigned this week, wrote in a series of posts on the social media platform X that he joined the San Francisco-based company because he thought it would be the best place to do AI research.

“However, I have been disagreeing with OpenAI leadership about the company’s core priorities for quite some time, until we finally reached a breaking point,” wrote Leike, whose last day was Thursday.

An AI researcher by training, Leike said he believes there should be more focus on preparing for the next generation of AI models, including on things like safety and analyzing the societal impacts of such technologies.

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He said building “smarter-than-human machines is an inherently dangerous endeavor” and that the company “is shouldering an enormous responsibility on behalf of all of humanity.”

“OpenAI must become a safety-first AGI company,” wrote Leike, using the abbreviated version of artificial general intelligence, a futuristic vision of machines that are as broadly smart as humans or at least can do many things as well as people can.

Open AI CEO Sam Altman wrote in a reply to Leike’s posts that he was “super appreciative” of Leike’s contributions to the company was “very sad to see him leave.”

Leike is “right we have a lot more to do; we are committed to doing it,” Altman said, pledging to write a longer post on the subject in the coming days.

The company also confirmed Friday that it had disbanded Leike’s Superalignment team, which was launched last year to focus on AI risks, and is integrating the team’s members across its research efforts.

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Leike’s resignation came after OpenAI co-founder and chief scientist Ilya Sutskever said Tuesday that he was leaving the company after nearly a decade.

Sutskever was one of four board members last fall who voted to push out Altman — only to quickly reinstate him. It was Sutskever who told Altman last November that he was being fired, but he later said he regretted doing so.

Sutskever said he is working on a new project that’s meaningful to him without offering additional details.

He will be replaced by Jakub Pachocki as chief scientist. Altman called Pachocki “also easily one of the greatest minds of our generation” and said he is “very confident he will lead us to make rapid and safe progress towards our mission of ensuring that AGI benefits everyone.”

On Monday, OpenAI showed off the latest update to its artificial intelligence m

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US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

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US, TikTok seek fast-track schedule, ruling by Dec. 6 on potential ban

The U.S. Justice Department and TikTok on Friday asked a U.S. appeals court to set a fast-track schedule to consider the legal challenges to a new law requiring China-based ByteDance to divest TikTok’s U.S. assets by Jan. 19 or face a ban.

TikTok, ByteDance and a group of TikTok content creators joined with the Justice Department in asking the U.S. Court of Appeals for the District of Columbia to rule by Dec. 6 to be able to seek review from the Supreme Court if needed before the U.S. deadline. 

On Tuesday, a group of TikTok creators filed suit to block the law that could ban the app used by 170 million Americans, saying it has had “a profound effect on American life.”

Last week, TikTok and parent company ByteDance filed a similar lawsuit, arguing that the law violates the U.S. Constitution on a number of grounds including running afoul of First Amendment free speech protections.

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“In light of the large number of users of the TikTok platform, the public at large has a significant interest in the prompt disposition of this matter,” the U.S. Justice Department and TikTok petitioners said.

TikTok said with a fast-track schedule it believes the legal challenge can be resolved without it needing to request
emergency preliminary injunctive relief.

The law, signed by President Joe Biden on April 24, gives ByteDance until Jan. 19 to sell TikTok or face a ban. The White House says it wants to see Chinese-based ownership ended on national security grounds, but not a ban on TikTok.

The parties asked the court to set the case for oral arguments as soon as practical during the September case calendar. The Justice Department said it may file classified material to support the national security justifications in secret with the court.

Earlier this week the Justice Department said the TikTok law “addresses critical national security concerns in a manner that is consistent with the First Amendment and other constitutional limitations.”

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The law prohibits app stores like Apple and Alphabet’s Google from offering TikTok and bars internet hosting services from supporting TikTok unless ByteDance divests TikTok.

Driven by worries among U.S. lawmakers that China could access data on Americans or spy on them with the app, the measure was passed overwhelmingly in Congress just weeks after being introduced.

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Spotify sued over alleged unpaid royalties

Spotify sued over alleged unpaid royalties

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Spotify sued over alleged unpaid royalties

Music streaming giant Spotify has been sued in a US federal court for allegedly underpaying songwriters, composers and publishers by tens of millions of dollars.

The lawsuit against Spotify USA was filed in New York on Thursday by the Mechanical Licensing Collective (MLC), a non-profit that collects and distributes royalties owed from music streaming services.

The suit alleges that Spotify on March 1, without advance notice, reclassified its paid subscription services, resulting in a nearly 50 percent reduction in royalty payments to MLC.

“The financial consequences of Spotify’s failure to meet its statutory obligations are enormous for Songwriters and Music Publishers,” MLC said.

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“If unchecked, the impact on Songwriters and Music Publishers of Spotify’s unlawful underreporting could run into the hundreds of millions of dollars.”

According to MLC, Spotify reclassified its Premium Individual, Duo and Family subscription streaming plans as Bundled Subscription Offerings because they now include audiobooks.

Royalties paid on bundled services are significantly less. MLC said Premium subscribers already had access to audiobooks and “nothing has been bundled with it.”

“Premium is exactly the same service that Spotify offered to its subscribers before the launch of Audiobooks Access,” it said. In a statement, Spotify said the lawsuit “concerns terms that publishers and streaming services agreed to and celebrated years ago.”

Spotify said it paid a “record amount” in royalties last year and “is on track to pay out an even larger amount in 2024.” “We look forward to a swift resolution of this matter,” the Swedish company said.

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In February, Spotify said it paid $9 billion to musicians and publishers last year, about half of which went to independent artists. 

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