'This Is The First Time In Two Decades That Google Is Extremely Vulnerable:' Perplexity's CEO Breaks Down Search Giant's Margin Trap

Perplexity AI CEO Aravind Srinivas believes search giant Google is currently at its most vulnerable since its founding over two decades ago, caught between its legacy dominance in search advertising and the fast-moving disruption of AI-native search.

What Happened: During the Sohn Investment Conference 2025 in New York last week, Srinivas did not hold back while saying, “This is the first time in two decades that Google is extremely vulnerable,” citing Alphabet Inc.’s GOOG GOOGL heavy reliance on ultra-high-margin search advertising as a strategic liability in the current AI arms race.

While the company has diversified extensively over the years, across YouTube, Cloud, and even hardware, Srinivas argues that none of them are comparable in profitability. “YouTube is not a high-margin business… cloud is not a high-margin business… same thing with AI,” he said.

A former Google employee himself, Srinivas underscored the irony of it all, with the company having led the way with early AI breakthroughs, with acquisitions like DeepMind and DNNresearch, founded by Nobel Prize-winning luminaries, Demis Hassabis and Geoffrey Hinton, and yet Google was paralyzed by its own success.

“They can still be entrapped into this trap that they saw coming,” he says, referencing the classic innovator's dilemma.

The branding risk is also immense, Srinivas noted. “One out of ten mistakes at the scale of 10 billion daily queries is a billion mistakes a day,” he says. That level of failure in a public-facing AI product could erode Google's reputation, which was once, and probably still is, synonymous with trust and reliability.

Why It Matters: Two weeks ago, Apple Inc. AAPL executive Eddy Cue disclosed that, for the first time, search volume on the company’s Safari browser, where Google remains the default search engine, had declined.

The revelation triggered a pullback in both Apple and Alphabet shares. Srinivas responded on X with a blunt take, “AI is eating search.” The decline was widely interpreted as a sign that AI-native platforms like ChatGPT and Perplexity are beginning to chip away at traditional search traffic.

Fund manager Gene Munster recently compared Google with video rental service Redbox, saying that the search giant, too, might slowly fade into oblivion over the next couple of years.

Price Action: Alphabet shares were down 1.52% on Tuesday, ending at $165.32 per share, but are up 0.31% after hours, following its Google I/O developer event.

Alphabet shares score high on Quality and Growth in Benzinga’s Edge Stock Rankings, it has a favorable price trend in the short term, but not in the medium and long terms. Check here for deeper insights into the stock.

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