Google stock (GOOG) tumbled over 6% on Wednesday, May 7, 2025, following a surprising revelation from Apple that has raised fresh concerns about the future of Google’s core search business. During a testimony in Alphabet’s ongoing antitrust trial, Apple’s services chief, Eddy Cue, disclosed that the company is seriously considering incorporating AI-powered search engines, including Perplexity, into future versions of its Safari browser.
This potential shift could drastically change how millions of users search the web, possibly encroaching on Google’s long-standing dominance in the search engine market. Cue’s comments came as he testified in a federal court regarding the Justice Department’s lawsuit against Alphabet, which has accused the company of monopolistic practices.
According to Cue, Apple is exploring partnerships with AI-driven search engines, which could replace traditional search engines like Google on Safari. This move is particularly significant given that Google pays Apple approximately $20 billion annually to remain the default search engine on its devices. If Apple transitions to AI-based search tools, it could severely impact Google’s advertising revenue, a vital aspect of its business model.
Last month marked a notable first for Safari, as Cue reported a decline in search volume — the first such dip attributed to the rising popularity of AI-powered tools. Users are increasingly turning to AI solutions like ChatGPT and Perplexity for their search needs, signaling a shift in user preferences that Google cannot afford to ignore.
In response to these developments, Google has been ramping up its own AI capabilities. The company has rolled out features such as AI Overviews, which provide smart answers generated by AI, and is testing a more conversational “AI Mode.” Additionally, Google has introduced Gemini, its standalone AI chatbot, although it has yet to unify these features into a single, seamless user experience.
Despite these efforts, the market reacted swiftly to Cue’s testimony, with Alphabet’s shares closing at $165.20 on Tuesday, May 6, 2025, before suffering a sharp decline in afternoon trading on Wednesday. The stock fell over 9% during the trading session, reflecting investor concerns over the company’s future market position amidst increasing competition from AI search engines.
Adding to the unease, investment firm Mairs & Power highlighted Alphabet’s underperformance in its recent quarterly report, noting that Google’s share price has negatively impacted its portfolio. The report emphasized the uncertainty surrounding Google’s ability to adapt quickly and effectively to the rapidly evolving AI landscape.
However, it’s important to note that Google’s fundamentals remain robust. The company reported $90.2 billion in revenue for the last quarter, representing a 12% year-over-year growth. Furthermore, hedge fund interest in Alphabet remains strong, with 174 major funds holding its stock at the end of Q1 2025, up from 160 in the previous quarter.
Despite these solid fundamentals, the message from Wall Street is clear: investors are eager to see how Google will evolve in the face of emerging AI competition. With Apple looking seriously at AI search options and users becoming more comfortable with chat-based tools, Google’s next moves will be critical in determining its place in the next era of the internet.
The implications of Cue’s testimony extend beyond just Google; they also put Apple in a precarious position. While the company benefits significantly from its partnership with Google, the prospect of integrating AI search options raises questions about the sustainability of their lucrative arrangement. Cue himself expressed concern over the potential loss of revenue, stating, “I have lost sleep over the possibility of losing the revenue share from the two companies' agreement.”
As the landscape of online search continues to evolve, the stakes are high for both companies. Analysts have noted that losing exclusivity with Apple would have “very severe consequences for Google even if there are no further measures.” This sentiment underscores the gravity of the situation, as both companies navigate the complexities of an increasingly competitive digital environment.
In summary, the developments surrounding Google and Apple signal a pivotal moment in the search engine market. With AI technology on the rise and traditional search engines facing unprecedented challenges, the future remains uncertain. As both companies adapt to these changes, the outcome may redefine how users search for information online and reshape the digital landscape for years to come.
