Should Investors Buy Microsoft Stock Instead of Apple Stock? | MSFT Stock vs. AAPL Stock

Parkev Tatevosian, CFA•Sep 4, 2026

Summary

Parkev evaluates the contrasting AI strategies of Microsoft and Apple, highlighting Microsoft's massive infrastructure investments in data centers and OpenAI versus Apple's more cautious licensing approach. Parkev notes that Microsoft has successfully expanded its operating profit margins to 46.8%, largely driven by the growth of its cloud services unit. In comparison, Apple maintains a 33% operating margin, bolstered by its highly profitable services division which generates 70% gross margins.

Parkev emphasizes that although Apple excels in return on invested capital (ROIC) at 70%, its outsourcing business model is currently facing risks from rising component costs in the memory and storage markets. Parkev expresses concern that these supply chain pressures could force further price hikes for the iPhone. Ultimately, Parkev concludes that Microsoft offers a better risk-reward profile based on discounted cash flow analysis and relative valuation metrics.

Microsoft (MSFT): Parkev identifies Microsoft as the better buy due to its forward price-to-earnings ratio of 21.7 and its strong revenue backlog in cloud services. Parkev calculates a fair value of $451 for the stock, and although the current price of $511 is slightly higher, Parkev considers it reasonably valued when accounting for a margin of safety. Parkev notes that Microsoft's growth is tied to its massive AI investments, which are already yielding significant margin improvements.

Apple (AAPL): Parkev points out that Apple trades at a much higher forward P/E of 33, making it over 50% more expensive than Microsoft. Parkev calculates a fair value for Apple at $212 per share, which implies a significant downside of approximately 30% from the current market price of $316. Parkev highlights that while a potential foldable smartphone could be a growth catalyst, the stock is currently overvalued and exposed to supply chain vulnerabilities.

Mentioned Stocks

MSFT

Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev prefers Microsoft over Apple due to its more attractive forward P/E ratio of 21.7. Parkev notes that Microsoft has doubled its operating margins since 2017 to 46.8% and has a strong growth engine in its cloud services. Parkev calculates a fair value of $451 per share and considers the stock to be fairly valued in the current market environment.

Loading chart...

AAPL

Sentiment: SELL

Reasoning: Parkev determines that Apple is significantly overvalued at current levels, trading at a forward P/E of 33. Parkev calculates a fair value of $212 per share against a market price of $316, suggesting a 30% downside risk. Parkev also highlights supply chain risks and rising component costs from suppliers like Micron as a threat to Apple's margins.

Loading chart...