The Popularity of ChatGPT has Impacted US Tech Company Chegg Inc.
The rise of the feedback-generating AI tool ChatGPT has caused a significant drop in the shares of US education services provider, Chegg Inc. On Tuesday, the share price fell over 47 per cent due to concerns that the widespread use of ChatGPT was putting pressure on Chegg's subscriber growth. Chegg CEO Dan Rosensweig confirmed that since March, there has been a significant increase in student interest in ChatGPT. As a result, analysts fear the company's core business could be affected as consumers choose to use free artificial intelligence tools instead.
Last month, Chegg announced its own AI tutor, CheggMate, which is a study aide tailored to students' needs. Although it is set to launch soon, it is unclear whether it will be enough to counter the slowdown in Chegg's core business. Analyst Brent Thill at Jefferies downgraded the stock to "hold" and warned that Chegg's core business could become extinct. Pearson PLC, Chegg's UK rival, also saw a drop in its shares by nearly 11.5 per cent on Tuesday.
Chegg has suspended its full-year outlook due to uncertainty about the impact on results, with targeted second-quarter total revenue between $175 million and $178 million. Unfortunately, this fell short of Wall Street expectations of $186.3 million. If losses hold through the session, Chegg's market capitalization could drop by $994 million. According to a report by Reuters, Analyst Arvind Ramnani at Piper Sandler said that Chegg has to make significant changes in a rapidly changing environment.
With the popularity of ChatGPT on the rise, Chegg may need to re-evaluate its business model and come up with innovative solutions. The impact of ChatGPT on Chegg highlights the growing need for companies to stay ahead of advancing technology trends.
