Chegg, a leading provider of educational software and services, saw its stock price drop by nearly 50 per cent on Tuesday, resulting in a $1 billion plunge in market value. This marked decline was blamed on users’ increasing reliance on the ChatGPT system developed by OpenAI, an advanced artificial intelligence software.
In its first quarter earnings call, Chegg CEO and co-chairman Dan Rosensweig stated that the company had seen a significant decline in subscriptions since March due to the rising popularity of ChatGPT. This software enables students to receive answers to their academic questions as well as generate essays from an input instruction.
In response, schools have unsucceessfully attempted to bar students from accessing ChatGPT while universities have implemented software that detects AI-written submissions. In light of this, Chegg has moved to develop Cheggmate, an educational chatbot, in collaboration with OpenAI. This product is due to be released in beta mode next month.
Despite these efforts, Chegg’s financial report indicates a bleak road ahead. The only source of hope for Chegg is that Rosensweig reported that the existing Chegg subscribers have retained their subscription and this drop may not last long. Chegg is aiming to improve its cost structure in order to cope with this technological shift and Rosensweig reassured investors that this is “not a sky-falling thing”.
As a result of the news, some analysts reduced their share price targets for Chegg. Josh Baer from Morgan Stanley placed his price target at $12 from $18 and Jefferies lowered the stock to hold from buy and decreased its price target to $11 from $25. The stock currently sits at around $9 per share after reaching $18.71 on Monday.
About Chegg
Founded in 2005, Chegg is a leading provider of educational services and learning platforms. They offer new and used textbooks, online tutoring, expert Q&A and more, enabling students to save time, money and get smarter.
About Dan Rosensweig
Dan Rosensweig is the CEO and co-chairman of Chegg. He is a highly experienced executive in the technology space, having served in executive roles at Yahoo!, Activision, and Guitar Hero. As the leader of Chegg, Rosensweig has pushed the company to become the premier source for all things education for students, as well as developing artificial intelligence and machine learning capabilities.
