In a surprising market shift, Alphabet’s stock plummeted by more than 7% on Wednesday, closing at $152.80. This drop wiped out close to $150 billion in market value, spurred by news that Apple Inc. is exploring the integration of AI-driven search capabilities into its Safari browser. This development poses a considerable challenge for Google, which relies heavily on iPhone users for its search traffic.

Apple’s Strategic Move

Reports from a Reuters insider revealed that Eddy Cue, an executive at Apple, acknowledged during an antitrust trial that the company is “actively looking at” ways to enhance its Safari browser. Cue also mentioned a notable decline in Safari searches for the first time last month, suggesting that users are increasingly opting for artificial intelligence to find information.

• Apple shares fell by 1.1% in response to the news.
• The decline in Safari searches has raised eyebrows and prompted discussions about its implications for Google’s search engine dominance.

Google’s Response to the Challenge

In a recent blog post, Google emphasized that it continues to experience an increase in overall search queries, including those from Apple devices. The company noted, “Users are discovering that Google Search is becoming increasingly valuable for a variety of inquiries, with new modes of access such as voice and visual search contributing to this growth.”

However, uncertainty remains regarding whether Cue’s comments were based on comparable metrics, leaving many to question the extent of the observed decline in Safari searches.

The Competitive Landscape

The potential introduction of Apple’s AI-based search features signifies a pivotal change in the search engine landscape, representing a serious threat to Google’s long-standing position. Google currently pays Apple around $20 billion each year to maintain its status as the default search engine on Safari, which constitutes approximately 36% of Google’s search ad revenue generated from Safari users. This new development could lead to serious strategic and regulatory hurdles for Google.

Furthermore, the scrutiny surrounding Google’s market power has intensified, with the U.S. Justice Department proposing measures that could prohibit the company from paying for default search engine status as part of ongoing antitrust lawsuits.

Alphabet’s Stock Performance Overview

Despite Wednesday’s significant drop, Alphabet’s stock has shown a 2.4% increase over the past month. However, in a broader context, its performance has been disappointing, with a 16% decline over the last six months and a 20% decrease year-to-date. Over the past year, Alphabet shares have dropped by 12%, yet they have still achieved an impressive 120% return over the past five years.

As the landscape continues to evolve, the implications of Apple’s potential search innovations on Google’s market dominance will be closely monitored by investors and analysts alike.