Apple and Microsoft both surpassed $4tn (£3tn) valuations on Tuesday as fears mount that the US stock market is entering bubble territory.
Shares in the two tech behemoths hit record highs as Wall Street’s main stock indexes jumped, with excitement growing around the potential of artificial intelligence (AI).
Both companies have seen their valuations surge this year despite having already been amongst the most valuable companies in the world at the start of the year.
Microsoft shares have climbed 28pc, while Apple has risen 15pc in 2025, adding around $900bn and $459bn to their market capitalisations respectively.
Kristofer Barrett, the head of global equities at asset management firm Carmignac, acknowledged that the “absolute market capitalisations of Apple and Microsoft are high”, admitting that there are “frothy areas” forming in the stock market.
However, he added: “These companies’ products are used by essentially everybody in both work and free time.
“Between the two, our view is Microsoft is more deserving of this absolute valuation, given its higher growth rate. Apple is generating meaningful profits, but innovation has been lacking and debates remain around its AI strategy.”
On Tuesday, shares in Microsoft jumped as much as 4.2pc after it announced a new deal with OpenAI, which is expected to clear the way for the ChatGPT maker to become a publicly-traded company.
OpenAI was valued at $500bn under the agreement, which will allow it to restructure itself into a public benefit corporation.
Microsoft would take a stake of about $135bn – or 27pc – in OpenAI Group PBC, which will be controlled by the OpenAI Foundation, a non-profit.
Chris Beauchamp, the chief market analyst at IG, warned “the risks are real” for Microsoft even as AI “is finally entering deployment phase rather than pure hype”.
He said: “Regulatory scrutiny is inevitable given Microsoft’s dominance, and the valuation assumes OpenAI keeps growing at breakneck speed. Any slowdown and this looks expensive.”
Meanwhile, Apple shares rose as much as 0.4pc to a record high of $269.87. It became only the third company to surpass the $4tn landmark, after Microsoft and semiconductor giant Nvidia, with the latter worth $4.5tn.
It comes as robust demand for its latest iPhone models has allayed fears over its slow progress in the AI race.
Apple’s shares have gained about 13pc since the new launches on Sept 9, in a remarkable turnaround that pushed the stock into positive territory for the first time this year.
Chris Zaccarelli, the chief investment officer for Northlight Asset Management, said: “The iPhone accounts for over half of Apple’s profit and revenue, and the more phones they can get into the hands of people, the more they can drive people into their ecosystem.”
US stock markets have hit multiple record highs this year, with the benchmark S&P 500 closing on Monday at an all-time peak for the 34th time already in 2025.
Excitement around AI has driven several huge deals. Nokia said on Tuesday that Nvidia would make a $1bn equity investment in the Finnish telecom equipment maker.
Meanwhile, PayPal shares surged by 9.6pc after it announced a deal where internet users will be able to pay for purchases through ChatGPT. It also upped its profit targets and announced plans for a dividend.
However, not all investors believe the performance is a sign of a bubble, shunning comparisons to the dotcom bubble that burst in the early 2000s during the excitement about the development of the internet.
Mr Beauchamp added: “We could be in a bit of a frenzy over the potential for AI to change the world, but this is nothing like 1999.
“Unlike the dotcom era, today’s leaders generate enormous cash flows. Microsoft earned over $95bn in net income last year, Apple more than $100bn.”
Mike Fox, head of equities at Royal London Asset Management, added: “I would be cautious in labelling this a bubble, given the valuations of Apple and Microsoft are not much higher than good quality non-AI businesses.
“Ultimately, the ability to monetise AI will determine if current valuations are too high or too low.”
