The AI wave continues. Of the two major tech giants, Microsoft and Apple, who is more worthy of investors' favor?

Investing in the market is a process of comparative analysis and selection. You need to choose the best investment that best meets your investment goals from a wide range of options. Today we're going to compare Microsoft Corporation (NASDAQ: MSFT) and Apple (AAPL). Both are tech giants and are among the two largest companies in the stock market based on market capitalization. The price-earnings ratio of both companies' shares is approximately 28 times.

Microsoft clearly has better growth prospects for at least the next few years. Currently, the consensus of analysts predicts Apple's profit growth of 7.5% in fiscal year 2024, and revenue growth of only 1%. They forecast sales growth of just over 6% and profit growth of 9.5%. On the other hand, Microsoft expects revenue growth of 15% and profit growth of 20% in fiscal year 2024, slightly higher than 14% in fiscal year 2025, and profit growth of 12.5%. As far as growth comparisons are concerned, Microsoft is the clear winner.

Earlier, Apple released financial reports. Due to factors such as falling product sales, market expectations were not ideal, and stock prices also fell. This Tuesday, Apple released new products, launched the latest versions of the iPad Pro and iPad Air tablets, as well as the new Apple Pencil Pro. The new M4 chip it launched this time is not only representative of Apple's next-generation silicon chips, but also an important achievement that Apple has built for artificial intelligence from scratch.

However, the current analyst consensus is that the Cupertino-based tech giant is “catching up” with its big rivals in the field of artificial intelligence (AI). This is important because AI is likely to be the biggest paradigm shift for the economy since the advent of the internet in the 90s. It has also been a huge driver of market earnings in recent quarters. According to comments on the company's recent fiscal quarter earnings call, Apple management appears to be adopting a “hybrid” AI strategy, which does not involve a major investment like building a new data center.

Microsoft, on the other hand, seems to be going all out to build its artificial intelligence architecture.

This week, Microsoft announced it will invest $3.3 billion to build a new artificial intelligence data center in Wisconsin. Additionally, Microsoft is investing in a new AI lab at the University of Wisconsin-Milwaukee to train workers in the use of AI technology. According to reports, the US investment plan announced by Microsoft this time involves an amount of 3.3 billion US dollars. In addition to the previously announced investment plans in Japan, Indonesia, Malaysia, Thailand, etc., the amount of investment recently announced by Microsoft in fields related to artificial intelligence has already exceeded 11 billion US dollars. It will invest $2.9 billion over the next two years to upgrade its cloud computing and artificial intelligence infrastructure in Japan; invest 1.7 billion US dollars over the next four years to expand cloud services and artificial intelligence in Indonesia, including building data centers; and invest 2.2 billion US dollars in cloud computing and artificial intelligence in Malaysia over the next 4 years. In the field of artificial intelligence, Microsoft seems to be clearly ahead of Apple, and is more likely to achieve extraordinary results on the train of the era of artificial intelligence.

Apple outsourced most of its production capacity to China more than 10 years ago. It has extensive business in China, and sales in China exceeded 70 billion US dollars in 2023. No tech company has more business in China than Apple. Apple's smartphone market share declined sharply in the first quarter of 2024, but the market share remained at 15%.

The company has begun moving some of its manufacturing operations to places such as India, but will still have huge operations in China for the foreseeable future. However, the Chinese smartphone market is becoming increasingly competitive, and local brands such as Huawei, Xiaomi, OPPO, and vivo have gradually won the favor of consumers with their in-depth understanding of the market and customized strategies. These brands all have great advantages in product innovation, price strategy, and channel layout, putting tremendous pressure on Apple.

Microsoft is mostly a software company, while Apple is mostly a manufacturing company. The profit margin of software has always been high, which is why the part with the highest profit margin of Apple is its huge App Store/iCloud business.

This is unlikely to change in the foreseeable future, giving Microsoft a sustainable advantage in terms of higher profit margins. In contrast, Apple's gross margin of product revenue in the first quarter of 2024 was 36.6%, while the service portion was 74.6%.

Given these four factors, Microsoft seems to be a better stock investment choice than Apple, even though Microsoft and Apple's current forward-looking price-earnings ratio estimates are roughly the same. Investors who want to seize the wave of artificial intelligence and enter the stock market are currently on the sidelines. They can focus on Microsoft's promising stock and go to the multi-asset trading wallet BiyaPay to monitor market trends. If they choose the right opportunity, they can directly deposit U into the platform to exchange US dollars for direct investment without an offshore account; in addition, investors can also bind BiyaPay to Carson Wealth Management's offshore account and withdraw US dollars to Jiaxin to invest in US stocks. Withdrawals are made on the same day, and the market is not delayed.

Source: Seeking Alpha

Edited by BiyaPay Finance