Better AI Stocks: Microsoft vs. Apple

Microsoft (MSFT -2.02%) AND Apple (AAPL -0.83%) have been technological rivals for about 40 years, since the dawn of personal computing.

Both companies have different paths to tech industry dominance. Microsoft rose largely through the ranks on the back of its ubiquitous Windows operating system, its dominance in enterprise software and, more recently, its strength in cloud infrastructure. Apple, meanwhile, has a market capitalization of $3 trillion, largely thanks to the popularity of consumer electronics devices like the iPhone, Mac, iPad and others.

In 2024, the two tech giants will once again face off. Let’s take a look at how each company is positioning itself as the next transformative technology, generative AI, begins to take hold.

1.Microsoft

Microsoft became an early leader in AI largely through its partnership with OpenAI, the AI ​​startup behind ChatGPT. Microsoft invested an estimated $13 billion in OpenAI, which allowed it to leverage OpenAI’s technology across a wide range of products, including Azure OpenAi, the CoPilot AI assistant, and the 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 spending per customer also continues to grow. Azure AI also appears to be a key reason it is gaining market share Amazon Web Services is widely considered to be the leader in cloud infrastructure.

AI is also driving products like Microsoft’s next-generation data platform, which has more than 14,000 paying customers.

Looking ahead, Microsoft also has a broader reach than any of its tech rivals in the “Magnificent Seven” with AI and assistants like Copilot. That’s because it can extend Copilot to a wider range of products, including Microsoft Office, other consumer products like LinkedIn and the Github code repository. It also has more direct relationships with enterprise customers than its competitors, giving it a ready-made market for AI tools.

So far, Microsoft has made good use of its opportunities, and CEO Satya Nadella is clearly willing to do whatever it takes to make Microsoft a leader in AI.

2. Apple

Apple has been much slower to embrace AI than Microsoft, and Apple has long been criticized for its apparent lack of an AI strategy. But the tech giant flipped the script when it unveiled Apple Intelligence in June, showcasing a suite of technology tools like writing assistants and image generation that will soon be embedded in iPhones and other Apple devices.

With this move, Apple has proven that a core advantage of its business is that it is much easier to deploy new technologies or new software to customers when you own the hardware, and one of its biggest competitive advantages is its installed base of over 2 billion devices.

In other words, if you own an iPhone or other Apple device, you’re likely to use Apple Intelligence because you’ll be directly exposed to it, and it’ll be free on your phone. In that sense, Apple has a completely different business model, and arguably a better one, than any other AI tech giant, because it can use this technology to boost sales and prices of its already wildly popular iPhones.

Apple Intelligence isn’t widely available yet, and its next phone, the iPhone 16, goes on sale next month. Sales of those devices will be the best early indicator of Apple’s AI potential.

Microsoft vs. Apple: Which AI Stock Is Better?

These two companies have the potential to dominate the AI ​​market, just as they dominated the last generation of technology from two different perspectives, but for now, Microsoft appears to have the upper hand.

The OpenAI partnership looks like a coup at this point, as that $13 billion investment has paid off massively in terms of increasing the company’s market capitalization and its lead over its rivals. OpenAI also seems to be a technology leader in the generative AI space, as it set the tone for a new era with the launch of ChatGPT.

Apple could also become a powerhouse with Apple Intelligence, but for now, Microsoft is the safer choice, and also the better of the two.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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 call options on Microsoft and short January 2026 $405 call options on Microsoft. The Motley Fool has a disclosure policy.