Shares of Homework Assistance Company plummeted by 50% as CEO claims ChatGPT is luring away customers.

Ben ZeisloftMay 3, 2023

Chegg Shares Plummet as AI Tool ChatGPT Draws Away Customers

Shares of online homework assistance and tutoring company Chegg plummeted on Tuesday after Dan Rosensweig, the company’s chief executive, noted that artificial intelligence tool ChatGPT appears to be drawing away customers.

The Rise of ChatGPT

The world has reeled in the weeks since the advent of ChatGPT, a mass-market AI system that can draft emails or write code in a matter of seconds. However, controversy has emerged in the education sector as some students use the tool to help answer homework questions or, in some cases, cheat on their assignments.

Chegg’s Decline

Rosensweig confirmed that the number of new customer enrollments are declining as a result of the AI breakthrough, causing concern among investors that the phenomenon is an existential threat to the firm. Total net revenues for Chegg were nearly $188 million for the first quarter of 2023, marking a 7% year-over-year decline. The company forecasted that total net revenues for the second quarter of 2023 would fall between $175.0 million and $178.0 million, a significant miss from the $193.6 million expected by analysts.

The Future of AI in Education

Many educators already leverage ChatGPT for purposes such as lesson plans and drafting curriculum, while 73% of teachers and 68% of students concur that the system can aid with learning, according to a survey from the Walton Family Foundation. Chegg plans to partner with OpenAI, the creator of ChatGPT, to develop an AI assistant called CheggMate, which will pair the large language model with “proprietary data and subject matter experts to make learning more personalized, adaptive, accurate, fast and effective, all in an easy to use and conversational manner.”

The Impact of AI on the Job Market

Chegg will almost certainly be one of several companies forced to quickly adapt as AI innovation accelerates in the coming years, even as the tools create productivity increases for workers and businesses. One recent forecast from Goldman Sachs predicted that AI could eliminate 7% of positions in the United States, largely in sectors that rely upon office work such as administrative support and legal, while positions in sectors such as building and grounds maintenance, construction, and healthcare support are predicted to remain broadly intact.

Conclusion

Chegg’s shares nearly halved from $17.59 to $9.04 between the market close on Monday and the early afternoon on Tuesday. The firm’s shares had already declined from $24.98 one year ago. As AI continues to advance, companies like Chegg will need to adapt and innovate to stay ahead of the curve.

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