Alphabet struggles as Apple executive claims AI will replace search engines

On May 7, 2025, Alphabet's shares experienced a significant downturn, falling 7% in response to comments made by Eddy Cue, Apple's senior vice president of services. During a testimony related to the Justice Department's lawsuit against Apple, Cue indicated that the company was exploring the integration of AI into its Safari web browser search functions. He expressed confidence that AI-powered search engines, such as those developed by OpenAI, would soon replace Google's traditional search capabilities. The market reacted negatively to his remarks, suggesting a shift in consumer behavior toward AI solutions, particularly among younger demographics. As analysts evaluated the implications of Cue's statements, many expressed concern about Alphabet's market leadership prospects. Some analysts highlighted the potential for consumer behavior to change dramatically, asserting that Google must act swiftly to incorporate AI into its search functionalities to prevent a decline in its market position. Despite the bearish sentiments, a minority of analysts remained optimistic, pointing to Alphabet's own advancements in AI technology through its Gemini suite of products. The decline in Alphabet's stock was exacerbated by the perception of a looming threat from AI-driven search engines, particularly given that this was the first time search volume appeared to have decreased for the company. Analysts at Wells Fargo noted the significance of this moment, labeling it a watershed for the company and urging it to make decisive moves to adapt to the evolving market demands. The overall sentiment on Wall Street was mixed, with some viewing the stock decline as an overreaction while others warned of continued volatility in the tech sector as companies grapple with the implications of AI. In the days following Cue's testimony, Alphabet’s shares experienced a minor rebound, gaining approximately 2.5%. This recovery indicated some investor belief in the company’s ability to weather the storm, though the broader concerns regarding market dominance and innovation in AI remained pressing topics of discussion among industry experts and analysts. As these developments unfolded, the ongoing debate about the future of search engines, particularly in the context of AI transformation, highlighted the critical intersection of technology and consumer behavior, reflecting a dramatic shift in how search functions may evolve moving forward.