• Microsoft became the second US-listed company to hit a $2 trillion market valuation after Apple.
  • Investors expect its lead in cloud computing to keep its success going, amid remote working.
  • Amazon's market cap reached $1.77 trillion on Tuesday, while Alphabet logged $1.67 trillion.

Microsoft crossed the $2 trillion market-valuation threshold on Tuesday, second only to fellow tech giant Apple in hitting that milestone.

The software maker's shares gained 1.2% on New York's Nasdaq on Tuesday, briefly reaching the multitrillion-dollar valuation. The stock closed slightly shy of that level at $265.51 per share, for a $1.96 trillion market cap. Apple's market valuation stands at $2.24 trillion.

Saudi Aramco, which went public in a record-shattering IPOin 2019, has in the past notched a $2 trillion valuation on Saudi Arabia's Tadawul exchange. But the oil titan's market cap stood at $1.88 trillion on Tuesday.

Microsoft's shares have gained 19% so far this year, outperforming tech peers Apple and Amazon. The Redmond, Washington-based company is best known for its enterprise computing software, and it is expected to announce an update to its Windows operating system this week. But the stock price rise is seen as spurred by investors betting that its lead in cloud computing places it center stage for coming global growth.

The COVID-19 pandemic accelerated technology use across the board, as people spent more time on their devices. That resulted in strong free cash flow, recurring revenues, and increasing user penetration for tech companies.

Wedbush's Dan Ives on Tuesday raised his 12-month price target for Microsoft to $325 from $310, giving it an "outperform" rating.

Microsoft's stock is up 19% year-to-date. Markets Insider
"With workforces expected to have a heavy remote focus, we believe the cloud shift is just beginning to take its next stage of growth globally," the tech analyst said in a note.

"We believe this disproportionally benefits the cloud stalwart out of Redmond, as Nadella & Co. are so well positioned in its core enterprise backyard to further deploy its Azure/Office 365 as the cloud backbone and artery," he added. Microsoft's board last week elected CEOSatya Nadella as its chair.

Ives noted that Amazon Web Services, Google, and IBM would also benefit, as enterprise workloads on the cloud are expected to increase from a 40% share to 55% by 2022.

Even so, some analysts have suggested tech stock valuations in general are too high and so are poised for a correction, though it's likely to be a zig-zag course rather than a straight decline.

Apple's market cap topped $2 trillion last August, becoming the first US company to reach that level. Amazon marked a $1.77 trillion valuation Tuesday, while Google parent Alphabet hit $1.67 trillion.