Shares of online homework assistance and tutoring company Chegg plummeted on Tuesday after Dan Rosensweig, the company’s chief executive, noted that artificial intelligence tool ChatGPT appears to be drawing away customers.
The world has reeled in the weeks since the advent of ChatGPT, a mass-market AI system that can draft emails or write code in a matter of seconds, with particular controversy emerging in the education sector as some students use the tool to help answer homework questions or, in some cases, cheat on their assignments. Rosensweig, who confirmed that the number of new customer enrollments are declining as a result of the AI breakthrough, attempted to calm investors who were concerned that the phenomenon is an existential threat to the firm.
“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 commented in a Monday earnings call. “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.”
Total net revenues for Chegg were nearly $188 million for the first quarter of 2023, according to an earnings report, marking a 7% year-over-year decline. The company forecasted that total net revenues for the second quarter of 2023 would fall between $175.0 million and $178.0 million, a significant miss from the $193.6 million expected by analysts.
“Because it’s too early to tell how this will play out, we believe that it’s prudent to be more cautious with our forward outlook,” Rosensweig added. “Therefore, we intend to provide only the next quarter’s guidance at this time.”
Shares for Chegg nearly halved from $17.59 to $9.04 between the market close on Monday and the early afternoon on Tuesday. The firm’s shares had already declined from $24.98 one year ago.
Many educators already leverage ChatGPT for purposes such as lesson plans and drafting curriculum, while 73% of teachers and 68% of students concur that the system can aid with learning, according to a survey from the Walton Family Foundation. Essays produced by ChatGPT can circumvent conventional plagiarism detection software because the system does not access the internet for published content; some developers, however, have produced software that can determine whether an essay was written by AI tools.
Rosensweig said that Chegg would partner with OpenAI, the creator of ChatGPT, to develop an AI assistant called CheggMate, which will pair the large language model with “proprietary data and subject matter experts to make learning more personalized, adaptive, accurate, fast and effective, all in an easy to use and conversational manner.” The novel system would be one of several AI solutions in the education sector. Khan Academy, a prominent nonprofit which creates free online tools to assist students with advanced coursework, likewise announced the creation of Khanmigo, an AI tool which offers one-on-one tutoring solutions to students.
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Chegg will almost certainly be one of several companies forced to quickly adapt as AI innovation accelerates in the coming years, even as the tools create productivity increases for workers and businesses. One recent forecast from Goldman Sachs predicted that AI could eliminate 7% of positions in the United States, largely in sectors that rely upon office work such as administrative support and legal, while positions in sectors such as building and grounds maintenance, construction, and healthcare support are predicted to remain broadly intact.