Chegg's stock plunges on fears of competition from ChatGPT
Shares of educational technology firm, Chegg, dropped by 48% on Tuesday after its CEO, Dan Rosensweig, warned investors about the impact of OpenAI's free ChatGPT service on the company's growth.
Rosensweig informed investors during a conference call that the company had initially been meeting expectations for new sign-ups of its educational services, but this had changed in recent months. He stated that the surge in student interest in ChatGPT since March was having an impact on Chegg's growth rate of new customers.
The phenomenon of ChatGPT took the education sector by storm after its launch in November, and some school districts have blocked access to the platform for its potential to assist with assignments and answer test questions. The New York City and Los Angeles public school districts were among those to block its access.
OpenAI tried to curb ChatGPT’s reputation as a cheating tool by introducing a new tool earlier this year, which can help teachers detect whether homework was done by students or artificial intelligence. However, it cautioned that the new tool is not entirely foolproof.
Last month, Chegg announced that it was launching its artificial intelligence companion, CheggMate. Supported by OpenAI's latest advanced artificial intelligence model, GPT-4, Chegg believes that the tool's problem-solving capabilities, combined with its unique data set and personalized learning platform, will empower students to learn more effectively and accurately in real-time.
Rosensweig called the stock sell-off on Tuesday as "extraordinarily overblown." He highlighted that Chegg remained a healthy company overall.
