CUPERTINO, California: Apple's plan to introduce AI-powered search options on its Safari browser poses a major challenge to Google, whose lucrative search business heavily relies on being the default engine for iPhone users.

The announcement sent Alphabet shares plunging 7.3 percent on Wednesday, erasing approximately US$150 billion in market value. Apple's stock fell 1.1 percent.

The move was revealed during Apple executive Eddy Cue's testimony in a U.S. antitrust case targeting Google's search dominance. A source familiar with Cue's statements told Reuters that searches on Safari declined last month as users increasingly turned to AI-powered tools.

Google, which pays Apple an estimated $20 billion annually to maintain its default search position on Safari, said it still sees growth in search queries from Apple devices. "People are seeing that Google Search is more useful for more of their queries — and they are accessing it for new things and in new ways," the company wrote in a blog post.

Analysts warn that Apple's AI push could undermine Google's search monopoly. "The loss of exclusivity at Apple should have very severe consequences for Google even if there are no further measures," said D.A. Davidson analyst Gil Luria.

Luria added that advertisers, who currently rely heavily on Google's search ads, could shift their budgets to other platforms if viable alternatives emerge.

To counter the threat, Google has ramped up its AI efforts, launching an "AI mode" in search and expanding AI Overviews — concise summaries that appear atop traditional search results — in more than 100 countries.

CEO Sundar Pichai said Google hopes to secure a new agreement with Apple to incorporate its Gemini AI technology into upcoming iPhones by mid-year.

Apple is also considering adding AI search providers such as OpenAI and Perplexity AI as future options on Safari, according to a Bloomberg report.

"This shows how far generative search models like ChatGPT and Perplexity have come," said Yory Wurmser, principal analyst at eMarketer, noting that ChatGPT alone reported over 1 billion weekly searches as of April.

Google remains dominant in search, with nearly 90 percent market share, but Apple's shift toward AI search options could reshape the landscape.