Alphabet Inc. (GOOG) drops 8.5% amid mounting fears over waning dominance in search engine market
Alphabet Inc. shares plunged more than 8% on Wednesday after Apple (AAPL) executive Eddy Cue revealed that the iPhone maker is considering pivoting its Safari browser to feature AI-powered search engines. The comments, made during testimony in the U.S. Department of Justice’s ongoing antitrust trial against Google, sent shockwaves through the market and signaled growing pressure on the tech giant’s long-standing dominance in search.
Cue, Apple’s senior vice president of services, testified that for the first time, Safari searches had declined — a shift he attributed to consumers embracing AI tools like ChatGPT and Perplexity AI. The revelation spooked investors, who are already wary of the antitrust implications surrounding Google’s exclusive deals and rising AI competition.
The stock reaction was swift. Alphabet’s shares (GOOG) were down 8.59% by midday. Apple’s stock also slipped 1.5% as Wall Street considered the ripple effects of potentially losing billions in annual payments from Alphabet.
AI Competition and Antitrust Threaten Google’s Core Business
At the center of this market drama is Google’s estimated $20 billion-a-year deal with Apple — an arrangement that keeps Google Search the default option in Safari. This partnership accounts for roughly a third of the search advertising revenue Google generates via Safari, and it has been a linchpin in maintaining its near-90% global search market share.
But Cue’s testimony hinted at a future where that arrangement may no longer be enough. He said Apple is actively exploring alternatives and has held talks with AI search firms, including Perplexity, about integrating their tools into Safari. While Cue noted Apple is unlikely to replace Google as the default search engine in the near term — due to the lucrative revenue it brings — he made clear that AI search will become a central fixture of the company’s browser going forward.
“The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures,” said Gil Luria, an analyst at D.A. Davidson. Luria pointed out that many advertisers concentrate their spending on Google because of its dominant market share — a grip that could loosen if viable AI alternatives take hold.
At the center of this market drama is Google’s estimated $20 billion-a-year deal with Apple — an arrangement that keeps Google Search the default option in Safari. This partnership accounts for roughly a third of the search advertising revenue Google generates via Safari, and it has been a linchpin in maintaining its near-90% global search market share.
But Cue’s testimony hinted at a future where that arrangement may no longer be enough. He said Apple is actively exploring alternatives and has held talks with AI search firms, including Perplexity, about integrating their tools into Safari. While Cue noted Apple is unlikely to replace Google as the default search engine in the near term — due to the lucrative revenue it brings — he made clear that AI search will become a central fixture of the company’s browser going forward.
“The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures,” said Gil Luria, an analyst at D.A. Davidson. Luria pointed out that many advertisers concentrate their spending on Google because of its dominant market share — a grip that could loosen if viable AI alternatives take hold.
Google Races to Catch Up as AI Landscape Shifts
Google has responded aggressively to the threat posed by AI-native rivals like OpenAI, Perplexity, and Microsoft’s Copilot. The company has launched AI Overviews within its traditional search results and is piloting an AI Mode that mirrors the conversational interfaces found in apps like ChatGPT. Additionally, Google is pushing Gemini, its flagship AI product, to compete directly in the generative search space.
Still, these moves have yet to fully convince investors that Google can maintain its leadership in the evolving AI-driven landscape. The DOJ’s case has already seen a federal judge rule that Alphabet operates an illegal monopoly in general search and text advertising. Remedies may include blocking the types of exclusive agreements that underpin Google’s dominance.
Adding to the uncertainty, Bloomberg reported that Apple is working to redesign Safari around AI capabilities and has already launched integrations with OpenAI’s ChatGPT in its ecosystem. If Apple moves ahead with making AI tools more accessible — and perhaps even central — within its browser, it could deal a major blow to Google’s dominance.
With regulators circling and competitors rising, Google faces mounting pressure to defend its most profitable business. Investors, it seems, are no longer convinced the company holds an unshakable lead.
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