Homework helper Chegg’s stock plummets as students turn to ChatGPT
Online learning platform Chegg said the rise of OpenAI’s ChatGPT is hurting its business as more students turn to the chatbot for homework help – a revelation that caused the company’s stock to plunge 48% on Tuesday.
Chegg CEO Dan Rosensweig admitted during the company’s earnings call on Monday that ChatGPT – which has wowed the public with its lifelike responses to user prompts – was disrupting its ability to lure new customers.
“In the first part of the year, we saw no noticeable impact from ChatGPT on our new account growth, and we were meeting expectations on new sign ups,” Rosensweig said during the call.
“However, since March, we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth,” he added.
Rosensweig said Chegg has maintained “very strong retention rates” of its existing customers since ChatGPT’s release.
Nevertheless, the Chegg boss said his company would be “more cautious with our forward outlook” in the days ahead as ChatGPT and other forms of so-called generative AI hit the market.
The company said it expected total net revenue of $175 million to $178 million in the second quarter of 2023 – a range that came in below analysts’ expectations, according to FactSet data cited by CNBC.
Chegg’s stock tumbled $8.52 to $9.08 per share.
Chegg offers various tools to students, including homework help, textbook rentals, test prep, assistance on essay writing and access to educators in exchange for a monthly fee. ChatGPT is threatening its business by offering students access to similar information for free.
The company’s warnings could exacerbate fears among a growing number of experts who have warned that rapid advancements in AI could upend the US job market and make some careers obsolete.
Google CEO Sundar Pichai recently warned that AI will cause job losses among so-called “knowledge workers,” such as writers, accountants, architects and software engineers.
In March, Elon Musk and more than 1,000 other experts cited potential job losses as a key risk while calling for a six-month pause in the development of advanced AI.
Experts also warn that responses from ChatGPT and other similar services are often riddled with inaccurate information.
Chegg is also making its own foray into the AI space with the upcoming release of CheggMate, its own chatbot.
The company collaborated with OpenAI to develop CheggMate, which will “harness the power of ChatGPT paired with our proprietary data and subject matter experts to make learning more personalized, adaptive, accurate, fast and effective,” according to Rosensweig.
