Apple’s Eddy Cue Testifies AI Is Eating Into Google Search—Alphabet Stock Drops 7%
Eddy Cue, Apple’s senior vice president of services, testified in the Department of Justice’s antitrust case against Google that search activity in Apple’s browsers has declined for the first time, largely because users are increasingly turning to AI tools for their queries, Bloomberg reported.
The case centers on the multibillion-dollar deal between Apple and Google parent Alphabet, which ensures Google remains the default search engine on Apple devices. The DOJ is scrutinizing whether that exclusive agreement stifles competition.
Neither Apple, Alphabet, nor the Justice Department responded to requests for comment.
Alphabet shares fell 7.3% following Cue’s remarks, as investors grew concerned that Google’s dominance in search may be slipping. AI-driven platforms like ChatGPT, Perplexity AI, and Meta’s AI services are rapidly gaining ground as popular alternatives.
In its 2024 annual 10-K filing, Alphabet acknowledged the growing threat from AI competition: “Other companies may develop AI products and technologies that are similar or superior to our technologies or more cost-effective to develop and/or deploy,” the company stated.
Ben Reitzes, an analyst at Melius Research who maintains a “Hold” rating on Alphabet with a $166 price target, described Wednesday as potentially “a historic turning point in Alphabet sentiment.” He added, “Just trust your eyes and ears—people are going to ChatGPT (and others) for search-equivalent queries more and more.”
In a separate ruling in August, a U.S. judge found Google to be a monopolist in general search and general text advertising. A potential remedy could include ending exclusive deals that lock in Google as the default search provider on platforms like the iPhone.
Apple shares also dipped 1.1% on Wednesday, reflecting concern that losing the Google deal could impact its bottom line.
Despite expressing support for keeping Google as the default search engine on Safari, Cue testified that Apple has also held discussions with Perplexity about incorporating its AI search into Safari. Perplexity declined to comment.
Meanwhile, Apple and OpenAI, the creator of ChatGPT, announced a partnership in June to integrate ChatGPT into iOS, iPadOS, and macOS devices.
In a related development, News Corp, which owns Barron’s publisher Dow Jones, has filed a copyright lawsuit against Perplexity AI. However, News Corp also signed a multi-year content partnership with OpenAI earlier this year.
