The economy is like a roiling tempest, and the S&P 500 has been on an unpredictable rollercoaster ride. But if history is any guide, a thunderous bull market could be right around the corner. The S&P 500 is teetering on the edge of reaching a fresh apogee, a palpable sign of a new bullish era. A mere 0.5% surge is all that’s needed to breach this all-important threshold.
Data source: YCharts.
The Microsoft Marvel
Back in 2023, the economy was ablaze and the S&P 500 showcased a brilliant performance doubling the return rate. Amid this ardor, Microsoft, an illustrious software company since its establishment in 1975, has shot into the limelight. Over the past 48 years, Microsoft has become a colossus, venturing into hardware, gaming, cloud computing, and artificial intelligence (AI), with its valuation scaling to a monumental $2.8 trillion. Only one entity, Apple, stands larger in the global corporate milieu.
To ensure accessibility to small investors, Microsoft championed nine stock splits since its public debut in 1986. A stellar performer in 2023, boasting an astronomical 57% surge that eclipsed the S&P 500 returns, Microsoft is set for another vigorous year. The tech giant is steering efforts to monetize its burgeoning AI portfolio by investing $10 billion in OpenAI, a pivotal move that bodes well for 2024.
Image source: Getty Images.
Azure OpenAI Service, a testament to the fusion of AI and business, commenced 2023 with a sprightly 200 customers. Within a mere nine months, the customer count soared to a staggering 18,000 entities. With 2024 in view, this count is destined to spiral further as businesses scramble to integrate AI into their operations, amplifying their productivity.
Another intriguing affair is Microsoft’s early-access rollout of its AI-powered Copilot technology in Microsoft 365 applications. Companies now wield AI prowess in Word, Excel, PowerPoint, Outlook, and Teams for a monthly $30 per employee, prompting 40% of Fortune 500 behemoths like Visa and KPMG to participate in the trial. Considering Microsoft 365’s massive user base exceeding 1.3 million companies, the scope for heightened revenue from AI-enhanced versions is tantalizing.
As Microsoft’s fiscal 2024 climax approaches in June, Wall Street analysts are proffering bullish forecasts, estimating a 14.8% year-over-year revenue boost to $243 billion. A bumper earnings per share hike of 14.5% to $11.24 is also on the cards. The forward price-to-earnings (P/E) ratio of 33.5 sets a slight premium. However, with Microsoft’s pioneering strides in AI, Wall Street maven Dan Ives at Wedbush designates Microsoft as a stock to watch, predicting a bullish run to $450 in 2024, a nearly 20% upswing.
The Apple Enigma
Apple, the visionary of the tech universe, ascended to public markets in 1980 valued at a relatively modest $1.8 billion. Fast forward to the present, Apple promptly rakes in that sum every 40 hours, culminating in a historic $3 trillion valuation — a pioneering feat unmatched in business annals. Steering a parallel course with Microsoft, Apple engineered five stock splits since 1987, an emblem of its unwavering commitment to democratizing ownership.
Apple’s iconic invention, the iPhone, released in 2007, has been a font of relentless innovation, propelling it toward monumental market value. The recent iPhone 15 range embodies the next frontier, sparking hope for an impending value surge – on-device artificial intelligence. The flagship features the groundbreaking A17 Pro processor, boasting the industry’s maiden 3-nanometer chip, turbocharging the smartphone’s computing prowess.
This cutting-edge neural engine is a potent AI juggernaut, delivering double the processing capacity of its precursor, the A16 Bionic. This revolution equips the iPhone to deftly handle AI tasks, promising an unparalleled user experience at the vanguard of technology.
The Rise of Apple: Unleashing AI and VR Potential in 2024
Apple’s Push into AI
Apple is poised to make a significant leap in the world of artificial intelligence (AI) with the development of its own AI chips. This technological advance is revolutionary as it will enable Apple to power its AI applications independently of the cloud or third-party computing services – a substantial departure from the norm for many AI applications today.
This breakthrough is expected to usher in a new era of powerful advancements in features such as the Siri voice assistant, predictive text, and Visual Lookup – a camera tool capable of identifying faces, plants, and even famous landmarks.
Apple’s Foray into Generative AI
Adding to the excitement, rumors abound that Apple is working on its own large language models and even a generative AI application known as Apple GPT. Although details remain scarce, the potential for a ChatGPT-style tool integrated into every aspect of an iPhone, processed using the device’s own chip hardware, could open up endless possibilities. Imagine it crafting messages and emails, or even creating image and video content for users.
Augmented Reality with Vision Pro
In addition to its AI endeavors, Apple is gearing up to unveil its new virtual reality headset, the Vision Pro, in the early part of 2024. Priced at $3,499, this innovative product may not sell in high volumes initially, but it heralds Apple’s first foray into a new product category since the launch of the Apple Watch in 2015. The Vision Pro offers developers the chance to create new gaming and entertainment experiences, potentially attracting consumers to this groundbreaking platform.
Financial Outlook
While Wall Street estimates a modest 3.5% year-over-year gain for Apple, with projected revenue of $396 billion in fiscal 2024 ending September 30, 2024, there is more to Apple’s story. The company’s commitment to returning significant capital to its shareholders adds another layer to its appeal. The recent buyback of $77.5 billion worth of its own stock in fiscal 2023, coupled with $15 billion in dividend payouts, underscores Apple’s dedication to rewarding its investors.
Looking Ahead to 2024
Despite its colossal size, Apple has always been a long-term narrative, akin to an aircraft carrier needing time to reposition. Nevertheless, 2024 promises to be an exhilarating year for the company as it lays the groundwork for its AI initiatives and introduces consumers to the Vision Pro platform on a large scale for the first time.
Investment Perspective
As Apple continues to unfurl its bold AI and VR ventures, investors are presented with an intriguing opportunity. The company’s forward-thinking innovations and unwavering commitment to shareholder returns indicate that Apple’s trajectory remains promising.
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