The rise in awareness of artificial intelligence (AI) is causing great uncertainty in various industries, including education. Chegg Inc., an online educational technology provider, is feeling the full brunt of the impact of this trend as it has recently informed investors that ChatGPT and other AI tools could ultimately be troublesome to their business model. Present-day educational institutions are among the first to impose restrictions on the usage of ChatGPT as students begin to use it for their term papers and exams, prompting a growing fear that this technology could supplant certain careers.
Chegg was established in 2005 with the goal of providing students with online access to buy, rent and sell textbooks. This platform has since grown to encompass a wider array of services, including live tutoring and assistance in obtaining up to $1 billion in scholarships. The company is having to deal with more and more competitors in the student study market as well as “cheating” sites, such as Bartleby and Course Hero, that charge for exam answers and course material.
To combat the decreased demand for its services due to growing competition, Chegg launched its new CheggMate AI tool, which combines its proprietary data and the GPT-4 model into a personalized learning experience. Despite this, their first quarter 2023 earnings disappointed investors as their revenue fell 7.2% YoY. In light of this, many analysts downgraded the CHGG stock, with ratings ranging from “Hold” to “Sector Weight.”
In addition to Chegg’s trials and tribulations, several other prominent educational technology stocks, such as Stride Inc. and 2U Inc., also have the potential to take a hit from the increased utilization of AI. Also, Education giant, Pearson Plc., has its own super AI tutor, Khanmigo, available for $20 per month.
Will ChatGPT be the final nail in the coffin for Chegg? As more of the industry has already been disrupted by competing AI alternatives, it is highly possible that Chegg’s platform may suffer the same fate. While the company is optimistic about the opportunities that come along with AI, it could be too little too late. Only time will tell as the industry continues to evolve.
