Microsoft has overtaken Apple in the two-decade long global competition for the company with highest market capitalization. Microsoft’s market value stood at $3.021 trillion at the end of February; Apple’s was $2.820 trillion.
While this metric is only somewhat reflective of value, understanding the nature of market cap and how it is achieved at technology and other companies can be a window into ways intellectual property can be deployed. A business’ patent and trademark strength is often a function of how IP rights are perceived when held by a particular owner.
A decade ago $1 trillion dollar was an unfathomable valuation, even for a tech giant. Today, there are ten or more companies that have attained this level, including some non-tech businesses.
A Mix of Rights
How much of a part does intellectual property ownership play in comprising market value? At first glance it may appear be less than in the past, with tech patents today more uncertain and in some industries less relevant, as well as more difficult to enforce.
But when brands, copyrighted content, trade secrets (user and other data; proprietary strategies and techniques), and patents, as well as favorable licensing agreements are considered, IP plays an increasingly significant if unquantifiable role in company value, especially when it comes to stock market giants, where optics matter.
Apple, in particular, a frequent patent litigation target, has been something of a Teflon® giant, regularly fending off IP disputes. It certainly has the resources to play the game, but it also has the patina of success that imbues their IP and its defense with an air of invincibility.
The Motley Fool shows that in addition to the Magnificent Seven ($13.2 trillion in collective value) – Microsoft, Apple, Alphabet, Amazon, Meta, NVIDIA, Tesla – Saudi Arabian Oil has cracked the trillion dollar list. Berkshire Hathaway and Eli Lilly are getting close.
An announcement, such as Microsoft’s now $13 billion investment in ChatGPT, can mean more to stock’s performance, and in turn market value, to the largest companies than actual results. Investors like to believe it is a sign of the future.
Reports the Visual Capitalist:
- Since 2009, Apple has been slightly in the lead becoming the first company to hit $1T, $2T, and even $3T valuation milestones, though Microsoft was never too far behind
- In the early ‘10s, Microsoft struggled as PC sales and profit margins were shrinking
- Ebbing iPhone demand and the Apple Watch ban in the U.S.–coupled with enthusiasm over AI–have helped the Microsoft pull ahead into top spot
- Under the leadership of Satya Nadella, Microsoft has added many irons to the fire, including gaming, social media, and cloud computing business units, as well as AI investments
- Apple will still be a company to watch this year as AI initiatives roll out and the Vision Pro headset goes to market
With more enormous market cap companies emerging every year, the perceived value of IP rights play a larger role than the actual value. An insurance policy, perhaps. Operating in the stratosphere requires more than a supplemental air supply.
Image source: VisualCapitalist; sweeneymichel.com
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