Investors worry Chegg could be schooled by ChatGPT’s A+ homework help

Simply acknowledging the impact of AI gave edtech firms a harsh haircut.

Chegg stock

Olivia Heller

Ah, history’s great innovators: Edison, Jobs, students in need of answers for homework due tomorrow, da Vinci, Gates, Einstein…

Since the dawn of school, students have found ways to get “help” on their homework. In recent decades, one of the most reliable has been Chegg.

The homework-helping site estimates a huge market for its services — 100m students globally, 8.1m of whom subscribed in 2022.

So, if the need for Chegg is that great, why was its stock down ~50% this week?

Do explain…

The cliff dive came after CEO Dan Rosensweig told investors he sees ChatGPT “having an impact on our new customer growth.”

It was a PR-mageddon. Analysts chopped price targets. “Chegg shares drop more than 40% after company says ChatGPT is killing its business,” read a CNBC headline. Other edtech stocks dipped on the news, too.

For Rosensweig, though, Chegg’s drop was “extraordinarily overblown.”

If you can beat ‘em, join ‘em

Tech firms are increasingly working to embrace AI tools like ChatGPT, while leveraging proprietary data. That way they can still, you know, make money.

Rosensweig, who said he’s met with OpenAI CEO Sam Altman on the subject, is focused on a tool called CheggMate, which combines ChatGPT’s technology with Chegg’s library — a super comp-tutor, if you will.

The unknown for Chegg — and the rest of a wary edtech industry — is whether vetted academic data will be enough to go up against free, improving chatbots.

BTW: One thing you won’t see from Chegg anytime soon: NFTs. “We didn’t see those as real or important or as threats,” Rosensweig said.

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