Apple Explores AI-Powered Search Alternatives, Google Stock Dips

Apple's Exploration of AI-Powered Search Alternatives Sends Google Stock Tumbling

The news that Apple is "actively considering" aligning its Safari browser with AI-powered search engines has significantly impacted Alphabet's stock, Google's parent company, and raises questions about the future of the $20 billion search deal between the two tech giants. Although the immediate market reaction was negative, the long-term implications for both companies could be more complex.

Antitrust Testimony Reveals Apple's Plans

The discussion about Apple's potential departure from Google as the default search engine in Safari ignited during the US Department of Justice's antitrust case against Alphabet. Eddy Cue, Apple's Senior Vice President of Services, testified in court that Apple is considering integrating AI search services like OpenAI, Perplexity, and Anthropic into Safari. "We will add them to the list – they probably won't be the default," Cue said regarding the AI providers.

Cue emphasized the shift in the search landscape brought about by AI. Before the advent of AI-based search engines, he hadn't considered any of the Google alternatives as equivalent. The new AI services address the problem of information retrieval in an innovative way and offer great potential.

Declining Searches in Safari – A Sign of Change?

For the first time, Apple recorded a decline in searches within Safari last month. Cue attributes this to the increasing use of AI-powered services. He predicts that these providers could ultimately replace classic search engines like Google. Apple has already had conversations with Perplexity and is evaluating other services for future integration into Safari – even if Google remains the default for now.

This development challenges the billions of dollars in revenue Google generates through its partnership with Apple. "It’s possible you won’t need an iPhone in 10 years, as crazy as that sounds,” Cue said, according to Bloomberg. “AI is a new technological shift that provides new opportunities for new market entrants.”

Apple's Balancing Act: Innovation Versus Financial Security

Apple already offers ChatGPT as an option in Siri and plans to add Google's Gemini later this year. According to Cue, Apple has also considered Anthropic, Perplexity, Deepseek, and Grok for this role. The agreement with OpenAI allows Apple to integrate other AI providers into its operating system, including its own developments.

Despite the enthusiasm for new AI search options, Cue emphasized that Google should remain the default in Safari, at least for now. He admitted to having "sleepless nights over the possibility of losing the revenue share from their agreement." He described the current deal with Google as the best financially.

Terminating the partnership would challenge Apple to replace approximately $20 billion annually through revenue from other services – a task without a simple solution. For Google, the end of the agreement would also be significant, despite the high cost. While Google would lose traffic in the short term, it would no longer have to pay for users who would likely choose Google anyway, and could free up resources for other priorities.

Strategic Calculus or Actual Disruption?

Cue's statements could also be strategically motivated. Emphasizing alternatives to Google could lessen regulatory pressure in the antitrust case. If the Department of Justice is more lenient towards Google, the lucrative partnership could continue – even as new technologies and public attention shift the market.

The decline in Alphabet's stock price by more than 7 percent and the drop in Apple's stock by up to 2.5 percent indicate that investors view the potential separation as negative for both companies. Should AI-powered answer engines gain the upper hand, the web itself could be on the verge of a fundamental transformation.