For greater than a decade, Apple was the inventory market’s undisputed king. It first overtook Exxon Mobil because the world’s most precious public firm in 2011 and held the title virtually with out interruption.

But a switch of energy has begun.

On Friday, Microsoft surpassed Apple, claiming the crown after its market worth surged by greater than $1 trillion over the previous yr. Microsoft completed the day at $2.89 trillion, larger than Apple’s $2.87 trillion, in line with Bloomberg.

The change is a part of a reordering of the inventory market that was set in movement by the appearance of generative artificial intelligence. The expertise, which may reply questions, create pictures and write code, has been heralded for its potential to disrupt companies and create trillions of {dollars} in financial worth.

When Apple changed Exxon, it ushered in an period of tech supremacy. The values of Apple, Amazon, Facebook, Microsoft and Google dwarfed former market leaders like Walmart, JPMorgan Chase and General Motors.

The tech trade nonetheless dominates the highest of the record, however the firms with essentially the most momentum have put generative A.I. on the forefront of their future enterprise plans. The mixed worth of Microsoft, Nvidia and Alphabet, Google’s mother or father firm, elevated by $2.5 trillion final yr. Their performances outshined Apple, which posted a smaller share worth improve in 2023.

“It simply comes down to gen A.I.,” stated Brad Reback, an analyst on the funding financial institution Stifel. Generative A.I. will have an effect on all of Microsoft’s companies, together with its largest, he stated, whereas “Apple doesn’t have much of an A.I. story yet.”

Microsoft and Apple declined to remark.

Microsoft has not led a expertise transition for the reason that private computing period, when its Windows working system dominated gross sales. It was late to the web, cell phone and social media.

When Satya Nadella turned Microsoft’s chief govt in 2014, the corporate was floundering. He refocused it on the rising cloud computing enterprise, turning it into a powerful challenger to Amazon, the pioneer within the area. Then Mr. Nadella pushed the corporate ahead once more, making an aggressive guess on generative A.I.

In 2019, Mr. Nadella made Microsoft’s first of a number of investments in OpenAI, the start-up that may construct the A.I.-powered ChatGPT chatbot. In the tip of the summer time of 2022, he was impressed by a preview of OpenAI’s underlying expertise, often known as GPT-4, and soon began prodding Microsoft so as to add generative A.I. to its merchandise at what he referred to as a “frantic pace.”

He began with including a chatbot to the Bing search engine, however then started pushing A.I. into the Windows working system and productive functions like Excel and Outlook, and providing OpenAI’s methods to clients of Azure, Microsoft’s flagship cloud computing product.

The income has only just started to show up in Microsoft’s monetary outcomes. Generative A.I. accounted for about three share factors of development to Azure within the three months that led to September, and the $30-a-month providing inside Microsoft’s productiveness software program started a common launch solely in November.

(The New York Times has sued OpenAI and Microsoft, accusing them of copyright infringement.)

This isn’t the primary time that Microsoft has pulled forward of Apple in recent times. It did so in 2018, as its cloud-computing enterprise started to flourish, and in 2021, when the pandemic disrupted Apple’s iPhone operations. But this alteration could possibly be extra indicative of a elementary shift within the tech trade.

“The question is: Who has the better mouse trap to go to the next level of $3.5 trillion?” stated Dan Morgan, portfolio supervisor and analyst at Synovus Trust, a financial institution within the Southeast. “You can make the case that Microsoft is in the better position. Apple has been struggling for the next big thing.”

The iPhone, which debuted in 2007, catapulted Apple to the highest of the inventory market. Between 2009 and 2015, the corporate went from promoting 20 million iPhones a yr to greater than 200 million.

When gadget gross sales slowed in recent times, Tim Cook, Apple’s chief govt, shifted the corporate’s focus from promoting extra iPhones to promoting individuals extra apps and companies on their current iPhones. The technique helped Apple’s annual income soar to $383 billion, a virtually fourfold improve from the tip of 2011, the yr that Steve Jobs, Apple’s co-founder, died.

Mr. Cook’s technique has proven indicators of fatigue. The iPhone, which accounts for greater than half of Apple’s income, has grow to be identified extra for its incremental enhancements every year than its noteworthy improvements. Purchases of iPads and Macs have declined. And the gross sales development of its companies equivalent to Apple Music are slowing.

Last yr, the corporate’s gross sales fell for 4 consecutive quarters. But shares of Apple nonetheless rose round 50 % final yr, and traders lifted its market worth to almost $3 trillion due to their perception that demand for the iPhone would proceed.

Wall Street analysts have predicted that this yr’s iPhone gross sales shall be weak. The firm is going through challenges in China, the place Huawei has launched a brand new cellphone and the federal government is limiting the usage of international smartphones.

While Microsoft and others have been constructing new generative A.I. companies, Apple has been absent from the dialog. During a name with analysts final yr, Mr. Cook stated Apple had work “going on” related to A.I., however he declined to elaborate.

Last yr, Apple engineers have been testing a large language model, which may energy a chatbot, The Times reported. The firm has additionally held discussions with publishers about buying materials to coach generative A.I. methods. But it has but to launch something publicly.

“Apple needs to take note that if they want to maintain their spot as one of the most innovative tech companies, they have to get behind A.I. in a big way,” stated Gene Munster, managing accomplice at Deepwater Asset Management.

Apple has been targeted on the discharge of an augmented actuality headset, the Vision Pro. The gadget, which can ship Feb. 2, is the primary main new product class that the corporate has launched for the reason that Apple Watch in 2014. Analysts challenge Apple will promote fewer than half 1,000,000 models.