TOP STORY
🍎 Google Drops -7% After Apple Exec Says AI Will Replace Search

🤯 There were so many big headlines and swings in the market this week, it was hard to pick a top story:

• 👴 Berkshire Hathaway ($BRK-B) fell -5% this week after Buffett stepped down as CEO

• 🚗 Tesla ($TSLA) has rallied +18% in the past month as Trump hints at a cut to US tariffs on Chinese imports

• 💊 Hims & Hers Health ($HIMS) jumped +23% this week (and +94% in the past month) after doubling Q1 profits and revenue

• 🪙 Bitcoin surged past $100,000 again (up +26% this month) as optimism grows ahead of US-UK trade talks

• 🏰 Disney ($DIS) jumped +18% after beating earnings and announcing plans to build a theme park in Abu Dhabi

• 🛢️ Enbridge ($ENB) is up +10% this month and just reported earnings with record Q1 revenue growth

🎯 But for today’s Top Story, let’s zero in on the news impacting one of the Most Held stocks on Blossom: Google ($GOOG).

📉 This week, while the market stayed flat (with the S&P 500 up 0.08%), Google fell -7% and is now down -19% year-to-date, putting it in 2nd-worst place out of the Mag 7 for YTD performance (after Tesla, which is down -21%).

🔍 So let’s take a look at what’s going on, and whether this is just short-term pain for Google or a fundamental threat to the search giant’s throne.

🔍 Is Google’s Search Dominance Under Threat?

🔍 We’ve all noticed it. We’re Googling less, and ChatGPT’ing more. But up till now, Google stock has largely been unimpacted, rising over +60% since ChatGPT was released.

😰 But that changed this week when Apple executive Eddy Cue announced that April was the first month ever where search activity on Safari (which is powered by Google) had ever slipped, attributing the declining volume directly to the new AI-driven tools everyone is using.

🤖 Cue says that, because of this, Apple will likely add generative AI search options from OpenAI or Perplexity as search options in Safari. This is a threat to Google, and a potentially massive shake-up of the long-standing partnership between Google and Apple, in which Google pays Apple ~$20B, equivalent to 36% of all search advertising revenue, for being the default search engine on Apple devices.

Long-time Wall Street Journal columnist Dan Gallagher summed up the problem nicely with his headline:

📉 These new fears caused the stock to plummet 9% overnight - the company’s third-largest share price decline since going public in 2004.

💰 With Google Search accounting for 55% of Google’s revenue, this is no small problem.

🚨 And Eddy isn’t the only one issuing a warning, according to Fortune, data shows that Google’s market share of traditional search engine traffic has fallen below 90% for the first time since 2015.

🤖 Even worse, overall, traditional search engines are losing traffic to AI tools, of which Google only has a 5.6% market share (compared to 80% from ChatGPT).

💃 And ironically, it’s not just AI that Google is losing ground to - Gen Z are increasingly turning to TikTok and Instagram for product, travel, and restaurant recommendations, with more than half using these platforms instead of Google as their primary search tool.

🔍 According to Bernstein analysts, Google’s share of search has already dropped substantially:

🥊 But Google didn’t take these comments laying down, quickly issuing a statement rejecting Apple’s claim - with many analysts coming to its defense.

🤿 But before we dive into Google’s response and what the future holds for Google, a quick word from this week’s sponsor State Street Global Advisors!

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TOP STORY CONT.
❌ Alphabet Says AI is Not Hurting Search Volumes

With Google’s stock in freefall, the company quickly put out a short 84-word blog post defending itself, with the first sentence summing things up:

In the blog post, Google implies that investors are misinterpreting the data, saying:

• People are searching more (even on Apple devices), but aren’t necessarily using Safari to do it - leveraging new modes of searching like Google Lens, which aren’t supported in the Safari app

• Google’s own ‘AI Overviews’ have increased search usage and result in more “commercial searches.”

• The biggest decline in Google searches come from searches around “math and homework” which don’t deliver much ad revenue anyway.

🛡️Analysts Defend Alphabet

Now, obviously, Google is going to defend itself, but analysts were also quick to clap back - with analysts at Jefferies, TD Cowen, Citi, and JPMorgan all maintaining Buy or Overweight ratings on the stock, calling Apple Exec Eddy Cue’s comments “overdone”.

The analysts pointed out that the context of Cue’s comments was important. Cue wasn’t just randomly talking smack about Google out of nowhere, Cue was on the stand testifying in an antitrust case that threatened to shake up Google’s search monopoly.

In a way, Cue was actually helping out Google by arguing that the search market is competitive, so that Apple doesn’t lose its $20B deal.

🌼 My Thoughts

🤷‍♂️ Overall, I’m conflicted. It seems quite obvious to me that Google is facing more competitive threats than ever before, and its dominance is at risk.

Even Google’s ad chief has said “the writing is on the wall” for generative AI’s eventual cannibalization of Google Search. And while Google is very aware of this, and actively taking steps to combat it (i.e. with AI Overviews which reportedly generate the same amount of revenue for Google as traditional searches), it seems unlikely they’ll be able to maintain the insane >90% market share they’ve enjoyed for years.

Some studies also show that even though adoption of the AI overviews is high, the click-through rates for AI Overviews are 35% lower, which is reflected in the growth of Google’s ‘paid clicks’ slowing from a 5% growth rate to a 2% growth rate in the most recent quarter.

So with all that in mind, personally, I plan to stay away from Google, but if you want a more optimistic take (or just join the discussion), check out @jacobb’s post on Blossom:

💖 P.S. I want to give a genuine huge shout-out to @jacobb. He is legit one of my favourite accounts on Blossom and delivers the kind of thoughtful, insightful, and well-researched content that Blossom was made for - backed up by his real portfolio. If you want to show Jacobb some love, subscribe to his newsletter here, which he pours his heart and soul into every week!

NEW PARTNERSHIP
🤝 Blossom Teams Up With The Deep End Podcast

🎙️ Many of you have asked me when Blossom is going to launch a podcast, and I’m excited to share that the day has come!

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FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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