Alphabet, the parent company of Google, saw its stock price drop sharply on Wednesday, resulting in a $140 billion reduction in market capitalization after Apple executive Eddy Cue testified that Google search was losing ground to AI competitors. Cue's statements during a high-profile antitrust trial also indicated Apple will include more AI-powered search choices in its Safari browser, contributing to market volatility.
Stock Drop and Market Reaction
Alphabet's stock price fell over 7% on Wednesday, wiping out about $140 billion from its market value. By mid-afternoon, shares had dropped as much as 9.5% before stabilizing, marking one of Google's largest single-day declines in recent years [1][3]. The broader S&P 500 index saw only minor movement, underlining the company-specific nature of Alphabet's decline [3].
Apple Testimony Highlights Shift to AI
Eddy Cue, Apple's senior vice president of services, told a Washington court that Google search volume on Safari had declined for the first time in 20 years, attributing it to rising competition from AI-driven platforms such as ChatGPT and Perplexity [1][2]. Cue stated, 'over the coming year we will add other (AI) choices to the search engine choice in the browser, because I think those products are getting better and better.' This disclosure unsettled investors who see AI as a growing threat to Google's search dominance [1][2].
Antitrust Trial and Business Model Implications
The federal antitrust case is examining Google’s revenue-sharing agreement with Apple, a deal that reportedly involves Google paying Apple tens of billions of dollars annually to be the default search provider on Safari [1][3]. The U.S. Justice Department is weighing whether Google should be forced to sell its Chrome browser or end such default agreements, both of which could significantly affect Alphabet's advertising business model [1]. Apple executives stressed that changes could impact their ability to invest in new products [1].
Investor Concerns and Industry Impact
Cue's testimony, which confirmed ongoing consideration of AI-powered search alternatives like Perplexity and Anthropic, has raised questions about Alphabet's ability to maintain search-driven ad revenue as competition intensifies [2][3]. Investors expressed immediate concern over the corporation’s capacity to preserve its dominant position if Apple reduces its reliance on Google for search queries [2].
Analysis
The significant decline in Alphabet's stock reflects acute investor sensitivity to potential shifts in the core search market. Experts point to the increasing viability of AI-powered search engines as a real challenge to Google's traditional dominance, particularly if Apple expands user choice in Safari. The multibillion-dollar revenue-sharing agreement between Google and Apple highlights how intertwined the companies' business models have become. Any forced change from the antitrust case, or a migration of search traffic to AI competitors, could have measurable impacts on future earnings for both firms.
Outlook
Market observers predict continued volatility for Alphabet's shares as the antitrust case unfolds and Apple's AI search initiatives progress. Decisions expected later this year could reshape search engine defaults and revenue structures for both companies. If Apple accelerates the adoption of new AI-based search options, Google may face further erosion of its search market share and related ad revenue, prompting strategic adjustments across the sector.
