Alphabet’s (GOOGL) dominant grip on the internet search market may face one of its biggest challenges. Bloomberg reported that Apple (AAPL) is considering integrating alternative AI-powered search tools into its Safari browser, potentially diluting Google’s long-held position as the default search engine on Apple devices.

The mere hint of this development sent Alphabet stock tumbling over 7.2% in a single day, a clear sign of investor anxiety over the potential disruption to one of Google’s most lucrative partnerships.

The shift stems from comments made by Apple’s head of services, Eddy Cue, during the ongoing U.S. Justice Department antitrust trial against Alphabet. Cue acknowledged that searches within Safari dipped for the first time recently, a decline he attributed to users increasingly turning to AI-powered solutions for their queries. He said Apple is exploring alternatives like OpenAI, Anthropic, and Perplexity AI to include in its future Safari offerings.

At the core of this disruption is the massive financial arrangement between Apple and Google, reportedly worth around $20 billion annually. This deal secures Google as the default search engine across Apple’s ecosystem. However, with AI upending traditional search behavior, Apple is re-evaluating that partnership.

While uncertainty remains, Apple might soon offer AI-powered search tools like OpenAI, Anthropic, and Perplexity AI as user-selectable options on Safari, if not as potential defaults.

Revenue Risks for Alphabet

This poses a significant challenge for Alphabet, as more than half of its revenue — specifically 57% in Q1 2025 — comes from its Search and related advertising services. The threat of Apple stepping away from exclusivity could significantly dent Google’s top line. Mobile search traffic originating from Apple devices is a key source of revenue, and if that traffic begins shifting to other AI-enabled engines, it could hurt Google’s dominance.

Moreover, beyond Apple, if AI alternatives gain real traction, they could create significant competitive headwinds for Google and lead to a diversification of ad budgets, which may hurt its dominance in the long term.

Google’s Expanding AI Ecosystem

Alphabet, for its part, has emphasized that it continues to see growth in query volumes, including from Apple devices. The company is doubling down on its own AI advancements to stay competitive.

Google has significantly expanded its AI capabilities across various platforms, which positions it well to grow in the long term. Its advancements in Search, such as AI Overviews and Circle to Search, are proving to be highly effective. AI Overviews, which offers summarized information through AI-powered search features, now boasts over 1.5 billion monthly users. Circle to Search, enabling users to search directly from their screens, has been adopted on more than 250 million devices, showing a nearly 40% increase in usage.

In addition to enhancing user engagement, Google’s AI-powered advertising tools are boosting ad relevance and performance, driving demand and revenue. Beyond Search, YouTube, bolstered by AI-driven recommendations and targeted advertising, maintains its leadership in content and ad delivery. Moreover, Google Cloud’s AI solutions are driving strong demand from enterprises, further solidifying its position in the competitive cloud computing market. These advancements reflect Google’s commitment to leveraging AI to improve user engagement across its ecosystem, which will support its future growth in a competitive landscape.

Wall Street Remains Confident in GOOGL Stock

Wall Street remains optimistic about Alphabet’s future. Analysts maintain a “Strong Buy” consensus on GOOGL stock, with an average price target of $201.16, suggesting potential upside of around 31% from current levels.

While Apple’s AI pivot introduces fresh headwinds, Google’s deep pockets, diversified revenue sources, solid data assets, and AI-driven evolution keep it well-positioned in the long run. It’s important to note that change is coming to the search landscape, and while Alphabet may face setbacks, it’s not stepping out of the race.