Chegg, a publicly traded company that provides homework assistance and online tutoring, lost almost half its share price Tuesday after the company said that artificial intelligence chatbot ChatGPT is hurting its growth.
Based in Silicon Valley, Chegg sells subscriptions for academic services that help students with writing, math assignments and studying.
ChatGPT, a chatbot tool built by artificial intelligence company OpenAI, was released on Nov. 30 to dizzying acclaim. The bot is trained to follow an instruction in a prompt and provide a detailed response. In less than a week, users exceeded more than 1 million.
GPT is free and lets users test, explore, manipulate, harass, and play with the latest in “conversational” AI. GPT stands for “generative pre-trained transformer” — a language model based on deep learning that is used to generate human-like text.
Chegg CEO Dan Rosensweig said his company didn’t see a significant effect on its business from ChatGPT until March, when OpenAI launched GPT-4, an updated version of the GPT series releases.
College students are Chegg’s main customers and the popularity of ChatGPT among students is affecting Chegg’s customer-growth rate, Rosensweig said. People who normally would have paid for Chegg around midterms or finals “now have a new, free site to go try.”
“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,” Rosensweig said during a Monday evening 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 rate.”
According to the GPT website, “The dialogue format makes it possible for ChatGPT to answer follow-up questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests.”
Chegg shares closed down 48.41 percent on Tuesday, going as low as $8.72 before recovering somewhat Wednesday to $10.43 as of this writing.
Other online-learning platforms also experienced a selloff after Rosensweig’s announcement, including U.S. shares of London-based Pearson, which fell 12.5 percent, and virtual language-learning company Duolingo, which fell 9 percent, Wall Street Journal reported.
A recent study by University of Pennsylvania researchers and OpenAI concluded that most jobs will change in some way because of GPTs. Accountants are the most vulnerable. At least half of accounting tasks can be completed much faster with the technology, according to the researchers. Mathematicians, interpreters, writers and nearly 20 percent of the U.S. workforce are also vulnerable.
“The warning from Chegg and the subsequent selloff are among the most concrete indications yet of the looming disruption that could come from the broader adoption of generative-artificial-intelligence applications,” Will Feuer wrote for WSJ. “Jobs and companies across the economy are exposed to the sudden rise of AI as businesses consider using the generative-text tools to boost production and shrink their workforces.”
Chegg is developing its own AI product, CheggMate to help students with their homework in collaboration with OpenAI, CNBC reported. However, Jefferies analyst Brent Thill says the impact of the product is uncertain.
“While CHGG plans to launch the CheggMate beta this month to a select few, the timing of a full launch is unclear,” he said. “We don’t expect there to be any meaningful impact from CheggMate in FY23, believing any potential impact won’t show up until FY24 at the earliest.”