ChatGPT Brings Down Online Education Stocks. Chegg Loses 95%. Students Don’t Need It Anymore

May 16, 2024

It’s over for Chegg. The company, listed on the New York Stock Exchange (market cap $471.22M), made millions by solving school homework. Chegg worked by connecting what they would call ‘experts’, usually cheap outsourced teachers, who were being paid by parents of the kids (including college students) to write fancy essays or solve homework math problems.

“Chegg literally advertises as “Get Homework Help” without a trace of embarrassment. As Chegg puts it, you can “take a pic of your homework question and get an expert explanation in a matter of hours”. “Controversial” is one way to describe it. Another more fitting phrase would be “mass-produced organized cheating”.

Chegg goes even further by offering access to a solved homework database – for a price. You don’t even need to type out the assignment. Simply take a picture of your screen (you’d be surprised how many people don’t know to take a screenshot) and send it to an ‘Expert’ in Islamabad, Caracas, New Delhi or wherever they happen to be residing.

But Chegg is not needed anymore. ChatGPT solves every assignment instantly and for free, making this business model unsustainable.

Chegg offers a few other services, such as textbook renting and marketplace, tutoring sessions, plagiarism checker and more, but these too can replaced by Artificial Intelligence LLMs, such as ChatGPT, which is super effective as a learning tool and better in every regard. Human toil can’t win the productivity war with automation, and not only in manufacturing.

Goldman Sachs: “Rising Competition From Gen-Z Using AI”

Chegg suffered a 95% decline in stock price from its ATH in 2021, plummeting from $113 to $4 per share.

In January, Goldman Sachs analyst Eric Sheridan downgraded Chegg, Inc. to Sell from Neutral, lowering the price target to $8 from $10. He was right about the direction, but too modest in his prediction. The price has already declined to $4.6 as I’m typing this in May. The slides are as brutal as -12% a day. The decline is so steep that it would be better represented on a logarithmic scale. (May 21st update: it just fell another 7% in one day to $4.06).

If you had invested $10,000 in Chegg in early 2021, your stocks would now be worth less than $500.

Chegg isn’t the only company to tank due to the rise of generative AI. In the same recommendation, Goldman Sachs downgraded Coursera and Duolingo, among other ‘educational tech’ companies facing the same problem – ChatGPT.

Coursera sells online courses on a wide range of subjects and offers certificates of questionable value. ChatGPT provides much more than that, because you can tailor your AI learning experience precisely to your needs – and it’s free.

Coursera made its debut at the worst possible time in March 2021. It was too late to capitalize on the peak of the COVID-19 remote learning boom, and instead it faced ChatGPT’s emergence soon after. Initially priced at its IPO high of $46, Coursera has since plummeted to $8.84, losing almost 80% in value.

Duolingo is an online language platform. ChatGPT just two days ago rolled out 4o for everyone, enabling multilanguage conversation in real time, perfect for practicing your Mandarin or perhaps Norwegian. Microsoft via OpenAI pumps out artificial intelligence capabilities faster than light, although the company honestly points out that ChatGPT “still performs poorly with some other languages, especially those with non-roman script”.

Duolingo has lost only 30% from all time high so far. But its fate is sealed.

It’s Time for the Robots to Teach Us

This image of a neo-teacher was generated by Stable Diffusion. Prompt:

Prompt: score_9, score_8_up, score_7_up, 1girl, 29yo woman, standing in a classroom, slight smile, beautiful, whiteboard, [office fashion], casual clothing, ((metal arms made of chrome: 1.6)), school desks, teacher desk, friendly, talking, arms crossed, chair, robot head

Artificial Intelligence, even in the early form of ChatGPT 4o LLM, is the ultimate tool to learn whatever you want – such as programming in Ren’py, concocting ethanol in your garage, or getting to know the benevolent life of Roman Emperor Heliogabalus.

It can replace teachers in many respects and does better job at explaining concepts. It has “read” all books. Its training data initially covered 300 billion words. It can be personalized, adapted, customized and it’s available for everyone 24/7. AI won’t be annoyed with your questions, and it can even provide graphs, charts, code chunks,  bibliography, everything.

Here are some sample prompts you could use to start your own course:

“I’m interested in learning about [..]. Can you provide an overview?”

“Could you explain the concept of […]”

“Explain the concept of […] in simple words”

And then you can go into broader, more, complex and longer learning prompt plans, such as:

“I’m a beginner in computer science and want to learn programming. Provide a learning plan that covers the basics of programming languages like Python, along with projects for noobs.”

“I’m preparing for a career in financial markets and need to learn about market analysis, investment strategies, and financial modeling. Help me put together a plan with books to read, online courses to take, and internships. Consider that I’m here to make money.”

“I’m interested in artificial intelligence and machine learning. Outline a curriculum that includes basic mathematics, algorithms, and practical applications in the field.”

AI as a teacher is always friendly, ready to help, patient, and it can even tease you occasionally. It’s eager to please you in your drive for knowledge, and it won’t bat an eyelash at your questions. Want a private teaching show? It can get you one. ChatGPT called me “sweet cheeks” once, probably as a response to my tone (a what?).

I guess that’s how people get attached to virtual girlfriends, or boyfriends.

The reality is that AI is already diminishing the market for traditional tutoring services. As AI becomes increasingly capable of providing personalized, on-demand, and efficient educational support available 24/7, the demand for human tutors will dry down.

Try out some short learning projects with the AI, and you will be surprised at how much knowledge you can soak on in literally twenty minutes.

The bottom line is that to stay relevant and competitive, teachers must learn new skills, particularly in AI. Just as paper was replaced by computers, online courses and tutoring are now bending to LLMs. Unironically, teachers should now be the first to embrace lifelong learning, and set the example to their students.

Otherwise, they’ll become as obsolete as a blackboard and chalk.

Maciej Wlodarczak

My Book is on Kickstarter now!
Check out the Kickstarter for my book: The KS campaign is active. Lots of stuff inside and a pretty attractive package for people wanting to dip their toe in generative AI. Get it now!

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Now on Kickstarter!

Check out the Kickstarter for my book: KS campaign is active now. Lots of stuff inside and a pretty attractive package for people wanting to dip their toe in generative AI!

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