CEO's Warning of ChatGPT Threat Sparks 38% Rout in Edtech Stock | Tech News

CEO's Warning of ChatGPT Threat Sparks 38% Rout in Edtech Stock

Chegg Inc. plummeted as much as 38% after warning that the ChatGPT tool is threatening growth of its homework-help services, one of the most notable market reactions yet to signs that generative AI is upending industries.

By:BLOOMBERG
| Updated on: May 02 2023, 13:50 IST
The impact of ChatGPT, an OpenAI tool that surged in popularity last year. (Photo by Lionel BONAVENTURE / AFP)
The impact of ChatGPT, an OpenAI tool that surged in popularity last year. (Photo by Lionel BONAVENTURE / AFP) (AFP)

Chegg Inc. plummeted as much as 38% after warning that the ChatGPT tool is threatening growth of its homework-help services, one of the most notable market reactions yet to signs that generative AI is upending industries.

The company, which offers online guidance for students taking tests and writing essays, also gave revenue and profit forecasts for the current quarter that fell well short of analysts' estimates. Chegg makes much of its money from subscriptions, which start at $15.95 a month, a revenue source that's in peril if students see AI chatbots as an alternative to paying.

You may be interested in

MobilesTablets Laptops
7% OFF
Apple iPhone 15 Pro Max
  • Black Titanium
  • 8 GB RAM
  • 256 GB Storage
28% OFF
Samsung Galaxy S23 Ultra 5G
  • Green
  • 12 GB RAM
  • 256 GB Storage
Google Pixel 8 Pro
  • Obsidian
  • 12 GB RAM
  • 128 GB Storage
Apple iPhone 15 Plus
  • Black
  • 6 GB RAM
  • 128 GB Storage

The impact of ChatGPT, an OpenAI tool that surged in popularity last year, began to be felt this spring, Chief Executive Officer Dan Rosensweig said in prepared remarks accompanying Chegg's first-quarter earnings Monday.

Also read
Looking for a smartphone? To check mobile finder click here.

“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,” he said. “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 rate.”

The remarks, coupled with the gloomy forecast, sent the shares as low as $10.91 in extended trading. Already, they were down 30% this year, closing at $17.60.

Industries from banking to media and education have pondered the ramifications from generative AI development since OpenAI introduced ChatGPT publicly in November. While investors from the US to China have chased stocks that proclaim they're working on similar models, it's rare for CEOs to attribute their company's underperformance to AI — followed by such a significant selloff.

Rosensweig said that retention rates of existing subscribers remain high, and he vowed to embrace AI “aggressively and immediately.”

“Throughout my career, I have witnessed the most significant technology platform shifts — from the creation of the internet to the explosion of mobile, and the movement of software to the cloud — and we believe that AI is the next big shift.”

 

Catch all the Latest Tech News, Mobile News, Laptop News, Gaming news, Wearables News , How To News, also keep up with us on Whatsapp channel,Twitter, Facebook, Google News, and Instagram. For our latest videos, subscribe to our YouTube channel.

First Published Date: 02 May, 13:50 IST
NEXT ARTICLE BEGINS

Best Deals For You