Alphabet’s shares fell 7.5% on Wednesday, its sharpest one-day decline in years, after reports that Apple is working on building its own AI-driven search engine. The action took place during a Department of Justice antitrust trial, which has investors wondering about the future of the multi-billion-dollar partnership between the two tech giants.

$20 Billion Deal

At the center of the selloff is Alphabet’s long-standing deal with Apple, in which the search giant paid an estimated $20 billion in 2022 to continue being the default search engine on Safari. That agreement is now in the crosshairs, with the DOJ claiming that it’s part of Google’s overall attempt to subdue competition. Witness testimony from an Apple executive raised eyebrows by hinting the iPhone manufacturer may be planning to break free of Google, or at least diversify its reliance.

The DOJ is looking for remedies that may result in the breakup of Google’s main businesses, potentially compelling divestitures of assets such as the Chrome browser or its advertising technology business. That ambiguity has started to bear down on investor sentiment.

Indication of Institutional Flight

Alphabet’s drop wasn’t only surprising percentage-wise, it occured on volume that has not been witnessed in years. A record of 78 million plus shares traded hands, sending up alarms regarding institutional trust. With the institutional crowd maintaining about 78% of Alphabet’s float, the spike can be interpreted that large funds possibly are reducing or selling out with a view towards regulatory risk.

Technical traders were also anxious. The stock was held back by the 38.2% Fibonacci level of its latest highs, and currently trades below its 50-day and 200-day moving averages, which is the “death cross” formation. Stocks going this low has not been witnessed since April 2021 and have now fallen nearly 20% so far in the year.

$142 Support Level

Alphabet’s next support technically is close to $142, the April 7 low. A clear break below that level could pull the stock into a new 52-week low, potentially opening the door for more downside. On the other hand, this zone might also be a buying opportunity for strategic investors looking for a bounce, particularly considering the company’s solid fundamentals beyond the regulatory story.

Resilient Brand under Fire

While competitive angst and legal battles grab headlines, Alphabet is still a search, ad, and AI infrastructure giant. The brand strength behind Google is still unrivaled. Even as competition grows fiercer, consumer loyalty holds firm, and that might be the company’s least appreciated advantage. Investors are preparing themselves for more volatility to come, but for those who believe long-term in Alphabet’s ecosystem and innovation, short-term fear might provide an opportunity window. It’s simple to doubt Google’s supremacy when the stocks drop, but let’s not forget that the internet still flows through its veins.