Shares of Alphabet (GOOGL -7.27%) (GOOG -7.50%) are falling on Wednesday. The company’s stock lost 7.8% as of 1:27 p.m. ET and as much as 9.5% earlier in the day. The leg down comes as the S&P 500 (^GSPC 0.43%) gained 0.4% and the Nasdaq Composite (^IXIC 0.27%) lost 0.1% on the day.

An Apple executive’s legal testimony Wednesday is sending shock waves through the tech community.

Apple is “actively looking” at adding AI search

Bloomberg is reporting that Eddy Cue, Apple’s senior vice president of services, testified Wednesday that Apple is “actively looking at” reshaping the Safari web browser on its devices to focus on artificial intelligence (AI)-powered search engines. The revelation came during Cue’s testimony in the U.S. Justice Department’s antitrust lawsuit against Alphabet — Google’s parent company — which centers on the cornerstone deal that makes Google the default search engine in Apple’s Safari browser.

When ChatGPT-3 was released to the public in late 2022, investors immediately were concerned that the technology could prove a true threat to Google Search’s near-stranglehold on how users search the web. The $20 billion deal that ensures Google is the default on Apple devices is a key aspect in maintaining its dominance. If Apple chooses to introduce AI-powered alternatives to Google on its devices, Google Search could lose a major chunk of its traffic, and therefore, value to advertisers.

Image source: Getty Images.

The signs are there

Cue also disclosed the particularly concerning detail that searches on Safari dipped for the first time ever last month, which he attributed to people using AI alternatives. This concrete data suggests the threat to Google’s search monopoly may be materializing faster than many had anticipated.

Market impact extends beyond Alphabet

Google Search is responsible for more than half of Alphabet’s total revenue. Losing its grip on internet searches would be very bad news for the company’s bottom line. Still, as much as the testimony is concerning, the tech giant is supremely aware of the threat and is working to mitigate it. Alphabet’s own AI offering is excellent, and I think it will ultimately weather this storm.