To The Moon

Judge Amit Mehta rejected the Department of Justice's request to force $Alphabet(GOOG)$ to divest Chrome, while prohibiting it from signing exclusive search agreements and mandating a degree of data sharing. The market reaction was straightforward: Google and Apple shares both rose, climbing nearly 6% and 3% respectively in after-hours trading—a classic case of "bad news is priced in." But zooming in reveals the ruling's vastly different implications for each company: $Alphabet(GOOGL)$ managed to "hold the line," while $Apple(AAPL)$ reaped "unearned gains."

For Google, retaining Chrome means preserving its most critical gateway for search distribution. With Chrome commanding roughly 65% of the global browser market, dismantling it would essentially turn off the tap for Google's search advertising revenue. The problem lies in the prohibition of exclusivity agreements—Google can no longer lock in Safari or Android manufacturers' default search positions through exclusive contracts. This directly dilutes the "channel moat" they've built over the past decade. Simultaneously, the data-sharing obligation raises deeper concerns—if Bing, Perplexity, or even OpenAI gain direct access to Google's search behavior data for model training, the technical barriers for handling complex long-tail queries would no longer be Google's exclusive advantage. This represents a classic case of "short-term gains eroded by long-term erosion." From a valuation perspective, this ruling clears the biggest regulatory gray rhino. The market may grant Google's PE a degree of expansion, potentially supporting it above 22x. Based on 2026 EPS projections, this could lift the stock price to $250. However, the erosion of its competitive moat is a tangible risk. Should the appeal ultimately uphold the status quo, Google's profit margins will face pressure over the next two to three years, particularly as TAC expenses may become "noisier and higher."

In contrast, Apple emerged virtually unscathed and even gained a bargaining chip. Google pays Apple approximately $20 billion annually for the default search position in Safari—after the ruling, this payment remains intact, but the "exclusivity clause" has been removed. What does this mean? It means Apple can now invite Bing, or even new AI players, to bid for the position. To maintain its standing, Google will likely have to pay more. Apple's short-term service revenue is thus secured, and the stock price surge is justified. But the deeper shift lies in strategic flexibility: Apple is no longer locked into Google, enabling it to simultaneously advance its own Apple Intelligence and even enhance Siri and Safari's AI search experience through multiple suppliers. For Apple, this represents a double win—stable cash flow plus enhanced long-term freedom. Of course, the risk lies in potential instability of future TAC payments, which could cause revenue fluctuations. Yet in my view, this poses little concern for Apple—a company with substantial cash reserves and a valuation already under pressure. Long-term, this flexibility could even unlock an additional 10-15% upside potential for Apple's ecosystem control.

At the industry level, this ruling strikes a balance between regulation and market forces. Google hasn't been crippled, but must open up more competition; Apple retains its cash cow while gaining stronger bargaining power; and emerging AI search companies see an opening for regulatory dividends. In the short term, this "clearance event" has eased regulatory uncertainty, boosting market sentiment. Both stocks are now on a trajectory of "valuation reassessment." However, investors must not overlook future structural risks: for Google, the gradual erosion of its competitive moat; for Apple, the volatility of its services revenue.

This ruling is a partial victory for Google, yet a complete win for Apple.

Google has safeguarded its core assets, providing near-term momentum for its stock price, but long-term resilience will require leveraging AI and product strength to counter intensifying competition. Apple has not only preserved its cash flow but also gained greater leverage in future negotiations over search and AI ecosystems. For investors, the valuation logic for Google and Apple will gradually diverge over the next two years—Google must demonstrate its ability to maintain competitive advantages through execution, while Apple may experience a wave of "AI-driven service premium revaluation."