Microsoft and Apple have been fighting a tough battle for 40 years. Who has the upper hand today?
Microsoft (MSFT -2.02%) And Apple (AAPL -0.83%) have been arch rivals in the technology sector for around 40 years, since the advent of the personal computer.
The two companies have achieved dominance in the technology industry in different ways. Microsoft has made its name primarily through its widely used Windows operating system, its dominance in enterprise software, and more recently, its strength in cloud infrastructure. Apple, on the other hand, has achieved a market capitalization of $3 trillion, largely through the popularity of its consumer electronics devices such as the iPhone, Mac, iPad, and others.
In 2024, the two tech giants will face off again. Let’s take a look at how each company is positioning itself as the next transformative technology, generative AI, arrives.
Image source: Getty Images.
1. Microsoft
Microsoft has become an early pioneer in the field of artificial intelligence largely due to its partnership with OpenAI, the AI startup behind ChatGPT. Microsoft has invested an estimated $13 billion in OpenAI, allowing it to leverage OpenAI’s technology in a wide range of products, including Azure OpenAi, its AI assistant CoPilot, and its code repository GitHub.
Microsoft is already gaining ground with AI-based products like few other companies are. For example, Microsoft now has 60,000 Azure AI customers, up nearly 60% year-over-year, and spending per customer continues to rise. Azure AI also appears to be a key reason why the company is gaining market share on Amazon Web services are generally considered to be the leader in cloud infrastructure.
AI is also contributing to products like Microsoft’s next-generation data platform, which has 14,000 paying customers.
Looking ahead, with AI and an assistant like Copilot, Microsoft also has a wider reach than any of its technology rivals in the Magnificent Seven. That’s because the company can extend Copilot to a wide range of products, including Microsoft Office, other consumer-facing products like Linkedin, and the Github code repository. The company also has more direct relationships with enterprise customers than its rivals, giving it a ready market for AI tools.
So far, Microsoft has played its cards well and CEO Satya Nadella is clearly willing to do whatever it takes to make Microsoft a leader in artificial intelligence.
2.Apple
Apple has taken a much slower approach to AI than Microsoft and has long been criticized for a perceived lack of AI strategy. However, the tech giant turned the tables when it unveiled Apple Intelligence in June, showing off a range of tech tools such as writing assistants and image generation that will soon be built into iPhones and other Apple devices.
With this move, Apple has underlined the fundamental strength of its business: it is much easier to deliver new technology or new software to consumers when you own the hardware. In addition, one of the company’s greatest competitive advantages is its installed base of more than two billion devices.
In other words, if you own an iPhone or another Apple device, you’re likely to use Apple Intelligence because you’re directly exposed to it and it’s available for free on your phone. In this respect, Apple has a very different business model than any other tech giant in AI, and it’s arguably better because it can use the technology to boost sales and prices of its iPhones, which are already overwhelmingly popular.
Apple Intelligence is not yet widely available, and the next generation of smartphones, the iPhone 16, will be launched next month. Sales of these devices will be the best early indication of Apple’s potential in AI.
Microsoft vs. Apple: Which is the better AI stock?
These two companies could end up dominating AI because they approach the latest generation of technology from two different angles. For now, however, Microsoft seems to have the upper hand.
The partnership with OpenAI looks like a coup at the moment, as the $13 billion investment has paid off tremendously by increasing the company’s market capitalization and its lead over competitors. OpenAI also seems to be the technological leader in the field of generative AI, as it has set the tone for the new era with the launch of ChatGPT.
Apple could also become a force with Apple Intelligence, but right now Microsoft is the safer AI stock and the better of the two.
John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Jeremy Bowman holds positions in Amazon. The Motley Fool holds positions in and recommends Amazon, Apple, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
