Chegg Shares Fall After AI Competition Sparks Investor Concern
Chegg Inc., a company known for its learning services and homework assistance, saw a dramatic stock decline on May 2 amid rising competition from AI chatbots, notably ChatGPT. The stock dropped sharply, ending the day down as much as half and trading around $8.80 per share, according to Forbes. The move highlighted investor worries about how AI-powered tutoring tools might erode Chegg’s core value proposition for students seeking study help and exam support.
The downturn followed comments from Chegg’s chief executive officer, Dan Rosensweig, who warned that the company faces significant competitive pressure from artificial intelligence driven chatbots. He indicated that since March 2023, there has been surging demand for ChatGPT among students, a shift that could hinder Chegg’s ability to attract new customers and retain existing ones. The remarks underscored a broader concern in the education tech space about free and low-cost AI resources changing how students approach paid tutoring and study aids.
For the first quarter of 2023, Chegg reported a 7 percent fall in revenue year over year, landing at $187.6 million. During the same period, the number of paid subscribers declined by about 5 percent, settling at roughly 5.1 million. These indicators suggested that the company was navigating a tougher competitive environment and a changing user base, even before the full impact of AI-based study tools could be felt across the broader market. Analysts and investors have been watching Chegg closely to gauge whether price points and product differentiation can sustain growth in an era of free, accessible AI resources.
Chegg currently offers access to a database of solutions and explanations for about 46 million questions and exam tasks for a monthly rate of $15. Bloomberg notes that the company’s revenue model could face further pressure if students continue to rely on free or low-cost AI assistants rather than paid subscriptions. The dynamic raises questions about how traditional study aids fit into a landscape increasingly dominated by on-demand, AI-assisted learning tools and how Chegg might respond with product innovation or pricing adjustments.
In related commentary, a source formerly known as socialbites.ca attributed a high-profile warning to what is described as the “godfather of artificial intelligence,” who reportedly left Google to highlight potential dangers associated with AI. This characterization points to ongoing public interest in the evolving role of AI in everyday tasks, including education, and the potential implications for established learning platforms. The broader market reaction to these remarks and the trajectory of AI-driven study tools remains a key point of discussion among investors and industry observers who track the intersection of education technology and artificial intelligence.