ChatGPT Is Posing a Threat to Some Businesses, and Chegg Shares Have Drop 50% as a Result
Key takeaways
- Education tech company Chegg’s shares tumbled after it said AI chatbots were hurting its new customer growth
- The contagion spread to competitors Pearson and Duolingo, which have lost 8% and 9% respectively
- It’s a stark reminder we’ll see some companies lose out as AI develops
The time of AI has arrived, and with it comes bags of potential for work and play. But while we’ve seen some big winners in the stock market, we’ll inevitably have some losers as well. Chegg was the first company to admit that AI chatbots like ChatGPT were hurting its growth and paid the price dearly. Let’s get into what happened.
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What did Chegg’s earnings report say?
Education tech company Chegg had a good Q1: it beat its earnings per share and sales forecasts, coming in at 27 cents per share and $187.6 million total.
They could’ve stopped there, but instead CEO Dan Rosenweig highlighted that Chegg’s new customer growth rate was suffering due to “a significant spike in student interest in ChatGPT”.
Wall Street was immediately alarmed, with Chegg’s share price finishing at $9.62 down from $18.35 in just one day. Investors don’t like bad news, and Chegg’s AI declaration sadly overshadowed its otherwise positive earnings.
AI winners and losers
Some companies are clearly benefiting from the AI revolution. Take Microsoft for example, which has seen close to a 29% share price increase in 2023 from its substantial investment in OpenAI and, most recently, chip manufacturer AMD. Google, which has its Bard chatbot, has enjoyed a 17% increase in the same time period.
But not everyone will win. On the back of the Chegg confession, shares in Pearson nosedived by 8% and Duolingo, which is one of the first companies to adopt ChatGPT-4 for its customer base, slid 9%.
A recent Goldman Sachs report found 300 million jobs could be impacted by automation, but also noted 60% of workers today work in roles that didn’t exist in 1940. In other words, while some industries will be affected by AI, new ones will replace them and upskilling will be the aim of the game.
The bottom line
It’s a bit of an own goal from Chegg’s CEO but also a reminder that we’re facing a changing economy off the back of AI development. Investors should inspect balance sheets a little more closely if they’re concerned about a company’s longevity in the new landscape — or just wait for the big boss to tell them.
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