Microsoft surpassed Apple on Thursday, becoming the world’s most valuable company with a market valuation of $2.875 trillion, while Apple’s market capitalization dipped to $2.871 trillion amid concerns over iPhone demand.

Microsoft’s strong performance was attributed to its early lead in capitalizing on generative artificial intelligence, drawing investor interest.

Analysts also predict that Microsoft’s faster growth and greater potential from the AI revolution contributed to its inevitable overtaking of Apple.

The weakness in Apple’s stock can be traced to a series of rating downgrades that raised concerns about the iPhone’s sales outlook, particularly in major markets like China. Apple’s stock has slid by 3.3% in January, compared to Microsoft’s 1.8% rise over the same period.

Furthermore, Apple’s services business, previously a bright spot, faces threats as regulators intensify scrutiny of a lucrative deal that designates Google as the default search engine on iOS.

In contrast, Microsoft’s positive trajectory in the stock market is attributed to its strategic rollout of generative AI-powered tools in collaboration with ChatGPT-maker OpenAI throughout 2023.

This marks the first time since 2021 that Microsoft’s valuation has exceeded Apple’s, reflecting the market’s confidence in Microsoft’s growth trajectory. Notably, Microsoft has led in market valuation over Apple a few times since 2018, notably in 2021 during concerns about COVID-driven supply chain shortages affecting Apple’s stock price.

Wall Street currently holds a more positive outlook on Microsoft, with no “sell” ratings and nearly 90% of brokerages recommending the stock. In contrast, Apple has received two “sell” ratings, and only two-thirds of analysts covering the company rate it a “buy.”

Both Microsoft and Apple exhibit relatively expensive valuations concerning their expected earnings, a common method of evaluating publicly listed companies.