Chegg's Stock Plunges on Fears of Competition From ChatGPT
Chegg, an education technology company, witnessed a 48% drop in its stock value, closing at $9.08 per share, after its CEO, Dan Rosensweig, warned investors that OpenAI's free ChatGPT service was affecting its growth. According to Rosensweig, Chegg was meeting expectations for new signups at the start of the year, but shifted in recent months as "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 rate."
Students who would normally pay for Chegg's services for midterms or finals were reluctant to do so when ChatGPT, a free service, was available, which is causing a concern for Chegg. ChatGPT has quickly become a global phenomenon since its November launch, with some school districts blocking its access due to its ease of use and its ability to answer take-home test questions and assist with homework assignments. OpenAI attempted to curb ChatGPT's reputation for cheating with a new tool that can help teachers detect if a student or AI did the homework. Chegg announced in the last month that it was launching its own artificial intelligence companion named CheggMate, supported by OpenAI's latest and most advanced artificial intelligence (AI) model, GPT-4.
The combination of Chegg's personalized learning platform, proprietary data set, and GPT-4's problem-solving capabilities will empower students to learn more effectively and accurately in real-time than ever before.
Rosensweig called Tuesday's stock sell-off "extraordinarily overblown" and emphasized that Chegg is still a healthy company. Chegg is based in Santa Clara, California.
