Wall Street’s more bearish investors believe that Alphabet could be facing an uphill battle of disruption. Shares of Alphabet sank 7% on Wednesday after Eddy Cue, senior vice president of services at Apple, said Apple was “actively looking at” reshaping its Safari web browser to focus on search functions powered by artificial intelligence, according to a report by Bloomberg . GOOGL YTD mountain GOOGL YTD chart Cue’s remarks came in testimony in the Justice Department’s lawsuit against Apple. The executive added that he believes AI search engines such as OpenAI will eventually replace their historic counterparts, such as Google. In response, many analysts across Wall Street took a “wait-and-see” approach, with some saying the stock decline was overblown. On Thursday, Alphabet shares rebounded as much as 2.5%. More optimistic analysts pointed to Alphabet’s own AI innovations, led by Gemini, a strong suite of products, the difference between search queries asked in AI versus traditional search questions and the Apple executive’s own self-interest in his Wednesday remarks. But other researchers — albeit a minority — warned that cracks are showing in Alphabet’s armor. Wells Fargo’s Ken Gawrelski called this a “watershed moment,” while Melius Research’s Ben Reitzes begged Alphabet to “make a bet already and disrupt yourself before it’s too late.” Here’s how some of Wall Street’s more bearish analysts answered the Apple executive’s remarks. Wells Fargo “View Apple’s remarks indicating search volume declined for the first time in April as a watershed moment. Believe consumer behavior is changing and GOOGL must act to accelerate adoption of AI-powered search to maintain market leadership.” Melius Research “The comments from Apple not only back our below consensus long-term estimates for Google Search — but also back downside in 2025. It may be time for Alphabet to make a real bet — instead of just experimenting all the time (Deep Research, Notebook LLM, AI mode, etc.), really confusing the heck out of people … Self-inflicted business model disruptions in the tech elite aren’t unheard of … Alphabet — make a bet already and disrupt yourself before it’s too late.” Citizens “While we acknowledge the value of Google’s distribution as it has seven services with 2B+ MAU, the superior search product offered by ChatGPT is taking share of queries. Additionally, while the valuation is increasingly compelling and Google has substantial cost levers to maintain profitability growth if search faces headwinds, we continue to view search estimates as having downside risk, and maintain our Market Perform rating given our view that the risk/reward in shares is currently balanced.” MoffettNathanson Research “While the market may have been waiting for a day like today where people’s worst fears on search are confirmed, we hate to say that Google investors are out of the woods. Yes, the stock is cheap … and yes, other divisions are growing nicely … and yes, search may be more resilient than people think due to commercial search share and pricing power. Our experience covering other sectors that have been disrupted tell us that this is a long bumpy journey that ultimately becomes smoother when today’s worries are long in a mirror of rear view. Unfortunately, we are just starting the ride.” — CNBC’s Michael Bloom contributed to this report.
