Apple is brewing a major overhaul of Safari, targeting AI search, with Google briefly dropping over 9%, facing severe challenges to its position

On Wednesday during the U.S. stock market, Google's parent company Alphabet's stock price plummeted, with the decline rapidly expanding, at one point dropping over 9%. Apple's stock price turned negative during the day, with an intraday decline of more than 2%. The drop in Google and Apple caused the U.S. stock market to decline, with the Nasdaq 100 turning negative during the session, after having risen 1% in after-hours trading the previous day.

In terms of news, Apple is "actively considering" a major overhaul of its Safari browser on its devices, focusing on an AI-driven search engine. This decision could end the long-standing partnership between Apple and Google, triggering significant changes across the industry and posing a severe challenge to Google's dominance in the search field. The era of Google-dominated search may be coming to an end.

Alphabet, Google's parent company, closed down nearly 7.3% on Wednesday, ending at $151.38.

Eddy Cue, Apple's Senior Vice President of Internet Software and Services, revealed the above news while testifying in the antitrust lawsuit filed by the U.S. Department of Justice against Alphabet.

The core of the U.S. Department of Justice's lawsuit is an agreement between Apple and Google valued at approximately $20 billion per year, which makes Google the default search engine on Apple devices. If the lawsuit is lost, it could force the two tech giants to terminate their partnership, disrupting the long-standing operation of devices like the iPhone.

Entry of AI Search

The acceptance of AI among consumers is also continuously increasing. Eddy Cue pointed out that the search volume on the Safari browser saw a decline for the first time in April this year, which he attributed to users turning to AI.

Eddy Cue stated that he believes AI search providers, including OpenAI, Perplexity, and Anthropic, will eventually replace traditional search engines like Google. He thinks Apple will incorporate these providers into Safari's options in the future:

We will add them to the list, but they may not become the default option. These products still need further improvement.

Before the emergence of AI, I thought other search options were unreliable. Now I feel there is greater potential because new players are solving this problem in different ways.

Currently, Apple offers OpenAI's ChatGPT as an option in Siri, and the agreement with OpenAI allows Apple to include other AI providers in its operating system, including its own.

Before ChatGPT was selected as part of "Apple Intelligence" in iOS 18 last year, Apple also conducted a "pitch" with Google. Cue mentioned that Google provided a list of terms at that time, "many of which Apple could not accept, and these terms do not exist in the agreement with OpenAI."Cue stated that Apple has also explored Anthropic, Perplexity, China's DeepSeek, and Grok from Musk's xAI. Cue specifically mentioned that Apple has had some discussions with Perplexity. Additionally, Cue expects to join Google's AI search product Gemini later this year.

Cue pointed out that AI search engines need to improve their search indexes to truly enhance performance. However, even if these improvements cannot be quickly realized, some of their other features are already "strong enough to make users willing to switch." Regarding the transition from traditional search to AI search, Cue stated, "There is ample capital now, and the players are large; I see no reason why this transition would not happen."

Cue also mentioned that large language models will continue to improve, further prompting users to change their usage habits.

Review of Old Partnerships

Nevertheless, Cue still believes that Google should continue as the default search engine for Safari and admitted that he has lost sleep over concerns about losing the revenue share from this agreement. He stated that the current agreement between Apple and Google regarding regular search still has the best financial terms.

Last year, Apple and Google expanded their collaboration by integrating Google Lens into the latest iPhone's "visual intelligence" feature, allowing users to take photos and analyze images through Google's AI.

Cue also stated that the agreement with Microsoft's Bing has recently been modified to an annual renewal format. Bing is a non-default option in Safari.

Cue testified in court that the pace of technological change is so rapid that in a few years, people may no longer use the devices we have now:

In ten years, you might not even need an iPhone, although that sounds crazy. Real competition only arises when technology changes. Technological change creates opportunities. AI is a new technological change that is creating new opportunities for newcomers.

How Does the Market Interpret This?

Media analysis suggests that this significant change is crucial for the iPhone and Apple, which have over 2 billion active devices. Since the launch of the first iPhone in 2007, users have relied on Google's search engine to go online. Now, users will enter a new search era dominated by multiple AI companies.

The market views Eddy Cue's testimony as a signal of the challenges facing both Alphabet and Apple, as they may have to abandon this lucrative arrangement. This also explains why, on Wednesday, in addition to Google's sharp decline, Apple's stock price also saw a drop of over 2%.

Apple's own AI technology has lagged behind its peers. The company does not yet have its own AI search engine and has been forced to delay significant upgrades to Siri, which were originally planned to utilize users' personal data to assist with query tasks. Apple will hold its annual developer conference on June 9, where it plans to unveil an improved version of its AI platform "Apple Intelligence."