Is this the end of the Alphabet as we know it? Investors panicked last week when Alphabet (GOOG 1.96%) (GOOGLE 2.00%) took a sharp 7% hit after a bold courtroom statement rocked the tech world. An Apple (AAPL 0.17%) executive revealed that he expects traditional search engines to disappear soon to be replaced by artificial intelligence (AI)-powered search features. That sent shockwaves through the market. Why? Because 56% of Alphabet’s revenue in Q1 came from Google search alone. A threat to Google Search is a threat to Alphabet’s core.

But is this really the downfall of the Alphabet? Not quite. In fact, this could be the smartest buying opportunity of the year.

Alphabet Saw It Coming, And They’re Ready

Let’s clear something up. Alphabet isn’t clueless. The rise of AI-powered search is not a surprise to its management. They’ve already been working aggressively to evolve with the trend. Instead of the classic list of search links, Google now shows AI-generated summaries right at the top of your search results. On the company’s Q1 earnings call, management said this new AI feature is already “incredibly popular” and expanding rapidly.

Alphabet isn’t standing still, it’s innovating fast, integrating more AI tools, and unlocking new use cases for billions of users.

A $20 Billion Twist

Here’s where it gets interesting. Back in 2022, Alphabet paid Apple $20 billion to remain the default search engine on Apple devices. That massive payment also became a central issue in the ongoing illegal monopoly case against Google. But now, Apple executive Eddy Cue says the company might offer AI-powered alternatives instead of automatically defaulting to Google.

If that happens? Alphabet won’t need to pay Apple anymore. The result? A $20 billion boost to Alphabet’s bottom line instantly. To put it in perspective: Alphabet earned $111 billion in profit over the last 12 months. Saving that Apple payment would raise profits by nearly 20% overnight.

What About the Downside?

Sure, if Apple gives users a choice, some might switch away from Google. But remember Google is still the world’s most trusted and widely used search engine. Most users will likely stick with it. So even if Alphabet loses a small portion of users, it will still retain a large chunk of that $20 billion. And with AI search becoming more embedded in Google’s ecosystem, the user experience is only getting better.

The Real Opportunity: Alphabet Is Dirt Cheap

While the market panics, savvy investors should pay attention. Right now, Alphabet is trading at just 16 times forward earnings, a bargain valuation for a tech giant still posting healthy growth. If the $20 billion payment to Apple disappears, that would reduce Alphabet’s expenses overnight, increase profits, and make the price-to-earnings (P/E) ratio look even more attractive. This is where real long-term investors win  by ignoring short-term fear and focusing on fundamentals.

Final Verdict:

This isn’t the downfall of the Alphabet. It’s the start of a new era. Yes, AI is transforming search. But the Alphabet is already leading that transformation. And the potential to stop paying Apple $20 billion? That’s not a threat, it’s a gift. The headlines may scream doom, but the numbers tell a different story. Alphabet stock, at this moment, is a rare tech gem trading at a discount  perfect for those who can look past the noise.