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The synthetic intelligence (AI) revolution is in full swing and I believe there will probably be a good few enterprise fashions disrupted by this expertise within the coming years. Certainly, there have already got been some, together with penny share Chegg (NYSE: CHGG).
In 2021, this on-line training firm had a share worth of $113 and a market cap within the $14bn area. Now, these figures stand at $1 and $112m, respectively.
In different phrases, the inventory has misplaced 99% of its worth!
What the heck has occurred?
For these unfamiliar, Chegg gives textbook leases, on-line tutoring, research assets, and homework assist, primarily for faculty college students by means of its subscription-based platform.
Sadly for Chegg, these are the type of issues that college students can more and more get from AI chatbots without spending a dime. Actually, since ChatGPT was launched in November 2022, the inventory has crashed 96%. So there’s a direct correlation.
In This autumn 2022, the corporate reported income of $205m. For Q1 2025, it’s now guiding for income of round $115m. So there was a major decline prior to now couple of years.
In the meantime, the variety of subscribers has fallen from 5m in This autumn 2002 to three.6m in This autumn 2024. Chegg has additionally turned unprofitable over this era, with an adjusted web lack of $160m on income of $617m final 12 months.
Double whammy!
However right here’s the place the plot thickens, and never in a great way for Chegg. You see, the rise of generative AI bots like ChatGPT didn’t simply threaten Chegg’s enterprise mannequin. It additionally posed a threat to Google’s search empire as a result of individuals would possibly get the data they need by asking an AI bot (thereby bypassing all these advertisements on Google’s search pages).
In response, the tech large rolled out AI Overviews (AIO) in Could 2024. These are AI-generated summaries that seem on the high of search outcomes, offering customers with concise solutions to their queries with out requiring them to go to exterior web sites.
Alas, Chegg says AIO has had a “profound affect” on visitors flowing to its web site. Non-subscriber visitors plummeted to detrimental 49% in January 2025, down considerably from the modest 8% decline it reported in Q2 2024.
Because the agency places it, “Google AIO has remodeled Google from a “search engine” into an “reply engine,” displaying AI-generated content material sourced from third-party websites like Chegg“. In different phrases, the agency is saying Google is utilizing its proprietary content material whereas driving much less visitors to its web site.
The corporate has introduced it’s suing Alphabet-owned Google.
Silly takeaway
To be truthful, Chegg is simply chugging on with product improvement. It has built-in AI and machine studying into its product stack, whereas its language studying service (Busuu) is rising strongly.
On the identical time, the corporate stated its launching a “strategic evaluate course of“. That sounds prefer it is likely to be open to a sale to me. In that case, maybe it is going to be acquired for a far larger valuation than $112m.
I want Chegg luck, however this inventory is way too dangerous for me.
Extra broadly, it serves as a cautionary story of AI disruption. Greater than ever, I believe it’s essential to ensure the software program/tech firms we’re invested in aren’t susceptible to being disrupted by AI. The expertise is more likely to trigger as a lot worth destruction as creation.
