• Alphabet shares fell sharply as Apple considers integrating AI-powered search into Safari.
  • Apple's potential shift comes despite earlier assurances it wouldn't compete in search.
  • The move could threaten Google's lucrative default search deal with Apple, worth $20 billion annually.

A Surprising Strategic Shift

Apple appears to be reconsidering its stance on search technology, with Senior Vice President Eddy Cue confirming exploratory work on AI search capabilities for Safari. This marks a notable reversal from February 2025, when Cue publicly dismissed the idea of competing with Google, citing prohibitive costs and privacy concerns.

The market reaction was immediate: Alphabet shares dropped 5% in early trading following the news. While Apple hasn't disclosed specific plans, sources suggest the company is actively developing AI search features that would complement its existing Apple Intelligence platform launched last October.

The Google Deal in Jeopardy

At stake is one of tech's most lucrative partnerships - Google's payment of approximately $20 billion annually to remain Safari's default search engine. This arrangement recently suffered a legal blow when a U.S. federal court ruled it violated antitrust laws. "The court decision clearly accelerated Apple's timeline," noted one industry analyst who requested anonymity due to client relationships.

Apple's potential entry into search comes as the company expands its AI capabilities across devices. Unlike Google's cloud-based approach, Apple emphasizes on-device processing and what it calls "Private Cloud Compute" - a distinction that could appeal to privacy-conscious users.

Market Reactions and Next Steps

Investors are weighing whether this signals a genuine competitive threat to Google or simply strengthens Apple's negotiating position ahead of any renewed search partnership. "The 5% drop seems excessive given how early-stage this appears," remarked a portfolio manager at a major tech-focused hedge fund. "But it does highlight how dependent Alphabet remains on search revenue."

Apple declined to comment on whether it plans to replace Google as Safari's default. However, company watchers note that recent delays in rolling out some Apple Intelligence features suggest the company may be proceeding cautiously with its search ambitions.