However, Apple's iPhone demand slowed down too, along with many other factors leading to the drop in market value.
Microsoft shares rose more than 3 percent as USA markets and large cap tech stocks shook off recent losses. In August, Apple became the first U.S. company with a $1 trillion valuation.
Microsoft challenged Apple's title as the most valuable US company on Monday, as the iPhone maker weathered a slump that drove the tech giant into a recent bear market over concerns related to smartphone sales in the critical holiday season.
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Yet now, that very product is among the challenges facing Apple, with concerns over weak iPhone demand pressuring shares to fall more than 25 percent from record levels. While Microsoft hasn't been immune from weakness in the technology sector, it has held up much better. When he took over in 2014, Nadella said he wanted to focus on its subscription-based businesses and the cloud.
According to Rich Ross, a technical analyst at Evercore ISI, Apple's stock "has another 18 per cent downside", which could take the stock to $140, its 200-week moving average. "It is not bullish when the biggest stock in the world is in "falling knife" mode", he wrote to clients on Monday.
For years, Apple has ruled as the USA stock with the largest market cap.
There were different accounts on Tuesday about whether Apple had closed the day with a lower market capitalization than Microsoft, but there was no doubt that it had fallen below - at least briefly - the value of its long-time competitor for the first time since 2010.