Deepwater Asset Management's managing partner Gene Munster has weighed in on the implications of Alphabet Inc.'s GOOG GOOGL Google’s regulatory challenges, including the potential divestment of the Chrome browser.
What Happened: On Thursday, in an interview with CNBC, Munster highlighted the potential impact of a Chrome spin-off on Google’s search market share.
According to Munster, spinning off Chrome could reduce Google’s dominant 90% search market share in developed regions to approximately 80%.
This shift could significantly affect Google’s search growth, which has been averaging 10–14% in recent quarters, potentially dropping to low single digits or even negative in the short term.
He said, “People love Google, and they will slowly come back,” but the stock is down about 5% because this gets to the “core of half their business, which is search.”
Despite these concerns, he believes the likelihood of a Chrome spinout is low, citing a lack of precedent for such a move.
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Munster also pointed out that Google's search business forms a significant portion of its revenue and is also a critical pillar for its AI initiatives like Gemini. A drop in search market share could weaken Google's ability to compete with rivals such as ChatGPT-parent OpenAI.
He went on to speak about the interconnectedness of regulatory challenges, noting that the DOJ's scrutiny of Google’s search deal with Apple Inc. AAPL could further damage the company's search business.
Earlier this year, a lawsuit uncovered that Apple received a substantial $20 billion in 2022 to set Google as the default search engine on the Safari browser for iPhones.
For investors, the stakes are high. Munster warned that if such worst-case scenarios unfold, Google's stock could drop another 10–15%.
Why It Matters: The DOJ has been actively pursuing measures to dismantle Google’s search monopoly, demanding Google divest its Chrome browser. This move is part of broader efforts to restore competition in the search market.
The DOJ has also suggested that Google might need to sell its Android operating system if other measures fail.
The impact of these legal actions has been significant, with Alphabet’s market value dropping by over $120 billion on Thursday, marking its steepest decline since January.
In response to the DOJ’s push, Perplexity AI’s CEO has also speculated about acquiring Chrome, while OpenAI is considering developing its own web browser to challenge Google’s dominance.
Price Action: On Thursday, Alphabet's Class A shares fell 4.74%, closing at $167.63, while Class C shares dropped 4.56%, ending at $169.24. In after-hours trading, Class A shares declined an additional 0.42% to $166.93, and Class C shares decreased 0.38%, closing at $168.59, according to data from Benzinga Pro.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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