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Shares of Alphabet Inc. (GOOGL) took a sharp turn lower midday Wednesday after a high-ranking Apple Inc. (AAPL) executive signaled that the iPhone-maker is exploring AI-powered search features for its Safari browser.
The stock, which was up as much as 1% earlier in the day, plunged nearly 5% following the remarks. Leveraged ETFs tied to the company saw even sharper losses. The Direxion Daily GOOGL Bull 2X Shares (GGLL), for instance, dropped nearly 10%.
Google's Search at Risk?
The comments came from Eddy Cue, Apple’s senior vice president of services, during his testimony in the U.S. Department of Justice’s antitrust trial against Alphabet. Cue said Apple had no intention of creating its own search engine but is looking into integrating artificial intelligence search tools into Safari. He also revealed that web searches conducted through the browser fell for the first time in April.
The remarks added to long-standing investor concerns that Alphabet’s core search business—which comprised 56% of total revenues during the first quarter—could be disrupted by the rise of generative AI tools like OpenAI’s ChatGPT. While Alphabet has rolled out its own AI chatbot, Gemini, it still lags behind its competitor in user adoption and mindshare.
Ironically, Cue’s comments were made during a trial in which the DOJ is accusing Google of maintaining a monopoly in search, in part through its multibillion-dollar deal with Apple to remain the default search engine in Safari. That deal, reportedly worth around $20 billion annually, is under scrutiny and could be unwound if the government prevails.
Market Reaction
Some bulls argue that Google will retain its dominant position in search regardless of the outcome, pointing to its technical capabilities and entrenched user base. Others highlight Alphabet’s other businesses—YouTube, Google Cloud and experimental divisions like Waymo—as potential long-term growth drivers.
Still, the market reaction suggests investors are taking the competitive threats seriously. After today’s drop, Alphabet shares trade at roughly 15 times forward earnings, a notable discount to other megacap tech names.
Funds like the SPDR S&P 500 ETF Trust (SPY), which counts Alphabet as its fourth-largest holding, also dipped on the news, reflecting the company's outsized role in broad equity benchmarks.