24/7 Wall St. Insights:
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Alphabet (GOOG,GOOGL) has been a phenomenal investment since its 2004 IPO, but a trio of threats could undermine its potential going forward.
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The DOJ is looking for Google to divest its ad business, Apple says Google searches on Safari declined for the first time in two decades, and it might replace Google with AI as the default search option.
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Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) has been a stellar investment for years, delivering remarkable returns driven by its dominance in search, advertising, and innovation in cloud computing and AI.
Since its 2004 IPO, GOOG stock has soared 3,800%, fueled by Google’s near-monopoly on search, which commands over 90% of the global market, and its ad business, generating billions annually. Strategic acquisitions like YouTube and Android, alongside ventures into autonomous driving and healthcare, have solidified its growth trajectory, making it a cornerstone of tech portfolios.
However, Alphabet now faces significant headwinds that raise doubts about its future as a must-own stock. The Department of Justice is pushing for Google to divest its advertising business, citing antitrust concerns, and for the first time, Google searches on Safari are declining, signaling potential cracks in its search dominance. PErhaps the decisive move may be Apple (NASDAQ:AAPL) exploring AI-driven search solutions to replace Google on its devices.
These challenges threaten Alphabet’s core revenue streams and long-term growth. Let’s examine each risk separately to understand the threat to Alphabet as an investment.
The Ad Business Breakup
The DOJ is pushing for Alphabet’s Google to divest key components of its advertising business — specifically AdX and Google Ad Manager — following a 2025 ruling that Google illegally monopolized the ad tech market. This targets Google’s ad exchange and publisher ad server, critical to the $264.6 billion in ad revenue generated in 2024, as it accounts for roughly 75% of Alphabet’s total revenue.
Divestiture could disrupt Google’s integrated ad ecosystem, reducing its ability to dominate real-time bidding and ad placement while potentially lowering revenue by limiting publisher and advertiser reliance on its tools. Google argues this would harm stakeholders, while the DOJ claims it’s necessary to restore competition.
Though Alphabet’s cloud segment ($43.2 billion in 2024) offers some buffer, a forced breakup could significantly dent its core ad-driven revenue, impacting stock value and long-term growth.
Searching for Answers
In April 2025, Google searches from Apple’s Safari browser declined for the first time in 22 years, a significant shift in user behavior. Google’s default search engine status on Safari, secured through a $20 billion annual deal with Apple, drives substantial traffic and significantly contributes to Alphabet’s ad revenue, the core of its financial model.
This unprecedented drop, reported during Google’s antitrust trial by Apple’s senior vice president of services Eddy Cue, suggests users are turning to AI-driven alternatives like ChatGPT or Perplexity, eroding Google’s search dominance. Safari’s significant share of mobile browsing amplifies the impact, as fewer searches directly reduce ad impressions and click-through rates. If sustained, this trend could weaken Google’s leverage in future Apple negotiations and shrink ad revenue.
While Alphabet’s diversified segments offer some cushion, a persistent decline in Safari searches threatens the stability of its primary revenue stream.
Hasta la Vista, Google?
Perhaps the biggest threat to Alphabet being an attractive investment is the report that Apple may be developing an AI-driven search solution to replace Google as the default search engine on Safari, a move that could reshape Alphabet’s future.
Google’s agreement with Apple ensures its search dominance on Safari, fueling the 11% rise in ad revenue in 2024. If Apple replaces Google with an AI-powered alternative, leveraging its Siri or external models like ChatGPT, it could drastically reduce Google’s search traffic from iOS devices, which account for a significant portion of mobile searches.
This would directly cut ad impressions and revenue, weakening Alphabet’s core business. The shift aligns with Apple’s privacy focus and growing AI ambitions, potentially attracting users seeking smarter, less ad-centric search experiences. While Alphabet’s cloud and YouTube segments provide some resilience, losing default status on Safari would be a severe blow, threatening Google’s market dominance and long-term financial stability.
Key Takeaways
Alphabet has long been a top-tier investment, driven by its unmatched strength in search and advertising. However, these three emerging challenges cast uncertainty over its future appeal.
The breakup of Google’s ad business could disrupt its primary revenue stream; the drop in Safari searches suggests users are exploring AI-powered alternatives, hinting at cracks in Google’s search dominance; and replacing Google with its own AI-driven search on Safari are all threats to Alphabet’s market grip.
Despite strengths in other areas, these risks could undermine Alphabet’s growth. Over the past decade, GOOG stock has returned more than 520% compared to a 230% return by the S&P 500. While an ad breakup might not occur, and some analysts believe Apple may not want to lose the $20 billion exclusivity deal with Google, the reported decline in searches suggests Alphabet may not remain as compelling an investment as it has been in the past.
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