Jamie Spencer
Shares of Alphabet and Apple fell sharply on Wednesday after Eddy Cue, Apple’s services chief, made comments regarding the future of search engines in which he suggested that AI search engines could eventually replace traditional search engines like Google.
Eddy Cue’s AI Search Predictions
In a testimony at a federal court in Washington, Cue discussed the future of search engines, suggesting that AI-powered platforms such as OpenAI, Perplexity, and Anthropic might soon become integrated as search options in Apple’s Safari browser. This raised questions about the future of Google’s dominance in the search engine market and its long-standing relationship with Apple.
Federal Lawsuit Adds Pressure
Cue’s comments come amid the Justice Department’s lawsuit against Alphabet, Google’s parent company. The lawsuit, which is focused on Google’s alleged illegal practices in dominating advertising technology markets, could have serious repercussions for Google’s business. A federal judge recently ruled that Google had been unlawfully dominating the advertising space. The current focus of the lawsuit is on Google’s payments to platform providers, including Apple, to make Google the default search engine on their platforms, such as iPhones.
Google and Apple’s Financial Relationship
The lawsuit’s potential penalties could threaten Google’s highly profitable advertising business, while also putting pressure on Apple’s financial arrangements with the tech giant. Google paid Apple up to $20 billion in 2022 to maintain its status as the default search engine on iPhones. While this deal has been lucrative for Apple, with billions of dollars flowing from Google annually, the potential changes to this arrangement now hang in the balance.
Impact on Stock Prices
The uncertainty surrounding this partnership caused Alphabet’s shares to drop by more than 8% in Wednesday’s trading. Similarly, Apple shares fell by 2% as investors reacted to Cue’s statements about the shifting landscape of search engines.
AI Search and Revenue Impact
In his testimony, Cue expressed concerns about the possible loss of revenue from the default search engine agreement, indicating that he had “lost sleep” over the possibility of Apple losing the significant income generated from the deal with Google. Furthermore, Cue mentioned a notable decline in search activity on Safari, attributing this trend to the growing use of AI-powered search engines.
Shifting Landscape of Search Engines
As AI technologies continue to gain momentum, Cue’s remarks highlight the growing concerns within Apple about maintaining a stable revenue stream from its partnership with Google. The evolving market dynamics and potential disruption by AI-powered search tools raise questions about the future of Google’s dominance and Apple’s reliance on Google’s payments.
While the future remains uncertain, the growing presence of AI search engines could reshape the search engine market in the coming years, putting pressure on companies like Google to adapt to the changing technological landscape.
