Shares of Alphabet and Apple dropped on Wednesday following remarks by Eddy Cue, Apple’s services chief, who expressed his belief that AI-powered search engines will ultimately replace traditional search engines like Google, Bloomberg reported. Cue mentioned plans to integrate artificial intelligence search services from companies such as OpenAI, Perplexity, and Anthropic as future options within Apple’s Safari browser, according to the report. The Apple executive was testifying in a federal court in Washington as part of the Justice Department’s ongoing lawsuit against Alphabet. Last year, a U. S. District Court judge ruled that Google had unlawfully dominated the advertising technology market, and the judge is currently determining what penalties or corrective actions should be imposed on the search giant. A key aspect of the case focuses on Google's practice of paying platform providers, including Apple, to secure default search engine status on their platforms. This lawsuit, along with any resulting remedies, poses a threat to Google's highly profitable advertising business, contributing to a more than 7% drop in Alphabet's shares on Wednesday. However, the lawsuit also presents risks for Apple. Google reportedly pays Apple billions annually—up to $20 billion in 2022, according to trial testimony—to be the default search engine on iPhones.

This arrangement proves lucrative for Apple and important for Google to maintain strong search volume and user bases. Apple’s shares declined 2% during Wednesday’s trading session. Cue’s statements have raised questions about the future stability of this relationship. He indicated a preference for Google to remain Safari’s default search engine, but also acknowledged concerns over potentially losing the revenue share stemming from their agreement, reportedly causing him sleepless nights. Furthermore, Cue noted that searches conducted on Safari declined for the first time in April, attributing this drop to the increasing use of AI search alternatives, according to the report.