The Unraveling of Chegg: How ChatGPT is Redefining Online Education

In a dramatic shift within the online education landscape, Chegg, a once-dominant player in providing academic assistance, is facing an existential crisis. With its market capitalization now at $471.22 million on the New York Stock Exchange, the company’s business model has been significantly disrupted by the advent of cutting-edge AI technology.

Chegg built its fortune by offering students solutions to their academic challenges, often through a network of outsourced educators for hosting services where parents and students could pay for detailed explanations of complex topics and assistance with assignments. The platform didn’t shy away from marketing itself as the go-to for academic help, underlining its services with promises like photo-based homework solutions delivered within hours. This approach, while successful for some time, drew its share of criticism for promoting what many termed as “mass-produced organized cheating.”

However, the emergence of powerful AI tools, notably ChatGPT, has rendered Chegg’s model increasingly obsolete. Students now have access to instant, free solutions for their homework, potentially without the ethical gray areas associated with Chegg’s services.

Chegg’s financial struggles are reflected in its stock value, which has nosedived by an astonishing 95% since reaching its peak in 2021, plummeting from $113 to a mere $4 per share. The company’s woes were compounded in January when Goldman Sachs analyst Eric Sheridan downgraded Chegg’s rating to Sell from Neutral, further slashing the price target to $8 from $10. The continuous decline, sometimes as steep as 12% in a single day, suggests a trajectory better captured on a logarithmic scale due to its severity.

For those who invested $10,000 in Chegg at the beginning of 2021, the current value of those shares would now be less than $500, highlighting the precarious nature of even the most promising investments in the fast-evolving tech landscape.

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