Alphabet shares fell hard on Wednesday after Apple’s Eddy Cue told a US courtroom that Google searches on Apple’s Safari browser declined in April – the first such drop – as users increasingly turn to AI tools like ChatGPT and Perplexity.
The stock recovered some ground after Google said search volumes are still growing, and multiple analysts claimed the sell-off looked overdone.
They suggest Apple may have reason to downplay Google’s dominance, given the Department of Justice is scrutinising their search partnership, which reportedly saw Google pay Apple $20 billion in 2022.
Besides, Google still owns YouTube, Android, Google Cloud and Waymo – it’s not a one-trick search pony.
Still, there are obvious reasons to be cautious. High-profile technology analyst Gene Munster called it the “beginning of the decline”, saying that search “is in the very early stages of a seismic change that investors haven’t fully factored into current valuation”.
If users bypass search in favour of AI assistants, monetisation becomes trickier – conversational answers don’t serve ads like ranked links do.
The structural threat is real. Alphabet’s valuation has already come down. Its price-earnings ratio is now 18, well below the 10-year average of 28.
Investors are pricing in AI-related disruption, though not a full-blown collapse of the search business. For bulls, it’s a bargain. For bears, it’s just the beginning of a long re-rating.
