Alphabet Inc. suffered a sharp market rout on Wednesday, with shares plunging over 7.5% and wiping out nearly $150 billion in market capitalization. The drop follows revelations from an ongoing U.S. federal antitrust trial in which Apple executive Eddy Cue testified that search traffic on Safari had declined for the first time in over two decades, citing increased user reliance on AI tools like ChatGPT and Perplexity.
This disclosure, coupled with reports that Apple is actively exploring integrating AI-powered search features into its Safari browser, dealt a significant blow to Alphabet’s growth narrative. Cue’s testimony indicated that Apple is seriously considering a major overhaul of its browser’s default search options, a move that could fundamentally alter the balance of power in the digital search landscape.
Alphabet’s reliance on iPhone users conducting Google searches is deeply rooted in its revenue model. Google reportedly pays Apple around $20 billion annually to remain the default search engine on Safari, accounting for roughly 36% of its search ad revenue from Safari alone. The potential loss of this default status introduces a looming threat to Google’s ad-dependent business model.
AI and Antitrust Challenges Converge
The impact of Apple’s AI ambitions is being amplified by the legal scrutiny Google is already under. The trial, presided over by U.S. District Judge Amit Mehta, aims to determine remedies for Google’s previously adjudged illegal search monopoly. Among the proposals on the table is a ban on Google’s payments to be the default search provider, a measure that could further weaken Alphabet’s hold over mobile search traffic.
Eddy Cue’s courtroom testimony has introduced a new dimension to the proceedings. He revealed that Apple is not only assessing AI-powered search tools as alternatives but also witnessing a decline in traditional search behavior. His statement that such a dip “has never happened in 22 years” sent shockwaves through financial markets and raised urgent questions about Google’s future relevance in the evolving search ecosystem.
At the same time, Google is defending itself by arguing that the emergence of AI search engines illustrates that competition in the market is intensifying, rather than being stifled. CEO Sundar Pichai has warned that some proposed remedies, like mandating Google to share its search data, would amount to a “de facto divestiture of search,” potentially harming user experience and innovation.
A Critical Moment for Alphabet’s Future
The outcome of this trial could reshape Google’s business model for years to come. Judge Mehta’s ruling, expected in August, could terminate Alphabet’s default search deals with Apple and other major tech firms. Alternatively, Google has proposed a compromise that involves continuing its default agreements but with annual renegotiations and more freedom for device makers to choose which Google services to install.
Wednesday’s market crash underscores just how high the stakes have become. Alphabet’s share price, which had climbed 2.4% over the past month, is now down 20% year-to-date and 16% over the past six months. Despite a solid 120% return over five years, the stock has lost 12% in the past year alone.
Meanwhile, Apple shares declined only 1.1%, suggesting investor confidence in its ability to redefine the future of search. With AI disrupting traditional search behavior and regulatory risks mounting, Google faces a pivotal test — not just from the courtroom, but from evolving user preferences and platform alliances that once seemed unshakable.
The road ahead for Alphabet will be shaped not only by legal rulings but by how effectively it adapts to a world where search no longer belongs exclusively to Google.
