On Tuesday, Chegg’s shares plunged by half and the warning rattled other companies, with shares in London-listed Pearson falling 15 per cent, language-learning platform Duolingo down by 10 per cent and US-listed education company Udemy dropping by more than 5 per cent.
The stock moves come as businesses are grappling with the opportunity and threat posed by generative AI systems such as ChatGPT, which produces highly sophisticated text outputs in response to short human prompts.
Chegg’s admission marks one of the first instances of a company acknowledging a hit to its finances as a direct result of advances in generative AI.
Big tech companies are racing to develop superior versions of the technology, with Google launching its ChatGPT competitor Bard in March. The previous month, shares in Google parent Alphabet plummeted after Microsoft unveiled a new version of its Bing search engine that included advanced new AI-driven features.