Microsoft (MSFT 0.43%) and Apple (AAPL 0.96%) have been tech archrivals for roughly 40 years, since the dawn of the personal computer.
The two companies have different routes to dominance of the tech industry. Microsoft has largely climbed the ladder through its ubiquitous Windows operating system, dominance of enterprise software, and, more recently, its strength in cloud infrastructure. Apple, meanwhile, has reached a market cap 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 titans are set to butt heads again. Let's take a look at how each company is positioning itself as the next transformative technology, generative AI, takes hold.
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1. Microsoft
Microsoft emerged as an early leader in artificial intelligence largely because of its partnership of OpenAI, the AI start-up behind ChatGPT. Microsoft has invested an estimated $13 billion in OpenAI, and that has enabled it to leverage OpenAI's technology across a wide range of products, including Azure OpenAi, its CoPilot AI assistant, and its GitHub code repository.
Microsoft is already gaining traction with AI-infused products in a way that few other companies are. For example, Microsoft now has 60,000 Azure AI customers, up nearly 60% year over year, and spend per customer continues to grow as well. Azure AI also seems to be a key reason it's gaining market share on Amazon Web Services, generally considered the leader in cloud infrastructure.
NASDAQ: MSFT
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AI is also contributing to products like Microsoft, its next-generation data platform, which has more than 14,000 paid customers.
Looking ahead, Microsoft also has a broader reach than any of its tech rivals in the "Magnificent Seven" with AI and with an assistant like Copilot. That's because it can extend Copilot to a wide range of products, including Microsoft Office, other consumer-facing products like Linkedin, and the Github code repository. It also has more direct relationships with enterprise customers than its peers, giving it a ready market for AI tools.
Thus far, Microsoft has played its hand its well, and CEO Satya Nadella is clearly willing to do what it takes to make Microsoft an AI leader.
2. Apple
Apple has taken a much slower approach to AI than Microsoft, and for a long time Apple was criticized for a seeming lack of AI strategy. However, the tech giant flipped the script when it unveiled Apple Intelligence in June, showing off a suite of tech tools like writing assistants and image generation that will soon be embedded in iPhones and other Apple devices.
With that move, Apple's hammered home the underlying strength of its business, which is that it's much easier to deploy new technology or new software to consumers when you own the hardware, and one of its greatest competitive advantages is its installed base of more than 2 billion devices.
NASDAQ: AAPL
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In other words, if you own an iPhone or another Apple device, you'll be likely to use Apple Intelligence because you'll be directly exposed to it and it will be free on your phone. In this sense, Apple has a much different business model, and arguably a better one, than any other tech giant in AI because it can use the technology to drive sales and higher prices of its iPhones, which are already overwhelmingly popular.
Apple Intelligence isn't widely available yet, and its next iteration of phones, the iPhone 16, will go on sale next month. Sales of those 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, the way they have the last generation of technology from two different angles, but for now Microsoft seems to have the upper hand.
Its partnership with OpenAI looks like a coup at this point as that $13 billion investment has paid off enormously in the company's surge in market cap and its head start over rivals. OpenAI also appears to be the technological leader in generative AI as it set the tone for the new era by launching ChatGPT.
Apple could emerge as a force as well with Apple Intelligence, but for now, Microsoft is the safer AI stock to own and the better of the two.
