Microsoft is anticipated to outpace Apple in market value over the next five years, as agreed upon by 13 institutional investors. Microsoft’s shares have already seen a 7% surge in 2024, propelling its market capitalization beyond $3 trillion, temporarily dethroning Apple as the world’s most valuable company. The investors unanimously express confidence in Microsoft’s potential to surpass Apple.

While share prices and valuations may undergo shifts during this week’s quarterly results announcements from both Microsoft and Apple, the long-term advantage is perceived to lie with Microsoft. The company’s recent strides in generative AI are considered a powerful asset over Apple.

The competition between Microsoft and Apple could also transform into a contest for second place, given Nvidia’s remarkable gains driven by its AI-powered chips. Microsoft’s early investments in technologies like ChatGPT from OpenAI and the integration of generative AI across its business provide it with a strong position.

In the long term, Microsoft’s success in generative AI is seen as a decisive factor. This technology is expected to play a significant role in enhancing Microsoft’s cloud computing offerings, especially in competition with Amazon and Alphabet in the burgeoning market.

Apple, traditionally reliant on the iPhone, faces challenges in detailing its strategy for participating in the AI arms race. While Apple has incorporated AI into product functionalities, investors are keen to hear more comprehensive AI plans during the upcoming quarterly results.

The recent rally in Microsoft’s shares, which surged 57% in 2023 due to its lead in generative AI, positions the company with a forward price-to-earnings ratio of 33. This is higher than Apple’s forward PE of 28, emphasizing Microsoft’s favorable standing.