The rise of AI chatbot, ChatGPT, is causing major disruptions in the education industry, with education giants Pearson and Chegg experiencing a significant decline in their market caps.
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Daniel O’Boyle reports on these developments, but is this just the beginning of AI’s impact on traditional education services?
Key Takeaways:
- AI chatbot ChatGPT is disrupting the education industry, causing education giants Pearson and Chegg to lose roughly $1 billion off their market caps.
- Chegg warns that the rising student interest in ChatGPT since March is impacting their new customer growth rate, resulting in heavy selling of shares and a significant decline in market cap.
- Pearson faces a 13.4% drop in shares despite exceeding financial expectations, highlighting the pressure on traditional education service providers to adapt to the rapidly evolving landscape.
- The future of traditional education services remains uncertain, as companies like Pearson and Chegg grapple with the disruptive impact of advancing AI technologies.
Shares of US-based education firm Chegg and London-listed textbook publisher Pearson took a substantial hit recently, as both companies lost roughly $1 billion (£803 million) off their market caps. This drop followed Chegg’s warning that students are increasingly opting for ChatGPT instead of its services.
Chegg, which provides homework help, digital and physical textbook rentals, textbooks, and online tutoring, released a trading update after US markets closed. The company stated that first-quarter results were mostly unaffected by the rise of generative AI. However, over the last two months, the situation has changed dramatically.
Chegg disclosed a significant spike in student interest in AI & ChatGPT since March, leading them to believe that it is impacting their new customer growth rate. The company’s announcement marks one of the first warnings of its kind from a large listed business.
Although Chegg mentioned plans to embrace AI in their update, this news unsettled investors. Chegg faced heavy selling in after-hours sessions, and its shares fell to $9.54 when markets opened. This decline resulted in Chegg’s market cap dropping by nearly $1 billion.
In London, Pearson did not suffer as severely but still experienced a 13.4% drop in shares, falling to 772.6p. This plunge occurred despite the company’s announcement on Friday that workers’ efforts to learn new skills helped the company surpass its financial expectations in the early months of the financial year.
With the sudden surge of interest in ChatGPT among students, traditional education service providers are feeling the pressure to adapt to the rapidly evolving landscape. It remains to be seen how companies like Pearson and Chegg will respond to the AI revolution and whether they can maintain their market positions in the face of such disruptive technologies.
Impact of ChatGPT on Pearson and Chegg
| Company | Market Cap Loss | Share Price Drop | Notable Developments | Response & Future Plans |
| Chegg | $1 billion | Fell to $9.54 | Significant spike in student interest in ChatGPT since March | Embrace AI technology in their services |
| Impact on new customer growth rate | Explore new strategies to retain customers | |||
| Heavy selling in after-hours sessions | Adapt to the changing market landscape | |||
| Pearson | £803 million | 13.4% drop | Shares fell to 772.6p | Invest in AI-driven learning solutions |
| Workers’ efforts to learn new skills helped surpass expectations in early months of the financial year | Focus on skill development programs | |||
| First-quarter financial performance exceeded expectations | Adapt to the evolving market environment |
This table provides a more detailed summary of the impact of ChatGPT on education giants Pearson and Chegg. It highlights the market cap loss, share price drop, notable developments for each company (numbered for clarity), and their responses and future plans to adapt to the changing landscape in the education industry.
The emergence of AI chatbot ChatGPT has led to significant losses for education giants Pearson and Chegg, with both companies seeing a substantial decrease in their market caps. This development raises questions about the future of traditional education services in the face of advancing AI technologies and highlights the need for these companies to adapt to an ever-changing market.
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