What Happened?
Shares of online advertising giant Alphabet (NASDAQ: GOOGL) fell 8.2% in the afternoon session after Apple's top services chief, Eddy Cue, said the company was testing AI search tools like Perplexity for Safari, hinting at a big change in how people search for information on Apple devices. This could hit Google hard, given that "search" is its bread and butter, and it pays (reportedly) Apple $20 billion annually to remain the default search engine on its devices.
However, Cue clarified that Apple was not seeking to immediately end its partnership with Google as the default search provider. Still, it raised significant uncertainty about the future of Google's presence on Apple's platforms, which gives it access to billions of users.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Alphabet? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Alphabet’s shares are extremely volatile and have had 35 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 16 days ago when the stock dropped 3.2% on the news that stocks grappled with more uncertainty as President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.
Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week.
Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
Alphabet is down 21.2% since the beginning of the year, and at $149.24 per share, it is trading 27.7% below its 52-week high of $206.38 from February 2025. Investors who bought $1,000 worth of Alphabet’s shares 5 years ago would now be looking at an investment worth $2,180.
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