AI Threat to Stock Prices Seen Spreading as Chegg, Pearson Sink

Investors are starting to see the downside from the rapid acceptance of artificial intelligence.

Shares of a California education company called Chegg Inc. plunged Tuesday after it warned that the quick rise to popularity of OpenAI’s ChatGPT tool is causing fewer students to sign up for its services. And that’s having ripple effects, driving shares of UK education publisher Pearson Plc down the most in more than a year.

Chegg Spooks Investors With ChatGPT Warning

The euphoria around AI has up to now largely been viewed as a boon for stocks. Investors have bid up shares of Nvidia Corp., which is a key supplier of chips required to power chatbots, and tech giants Microsoft Corp. and Alphabet Inc. are racing to incorporate more generative AI features in their products.

But the potential losers are coming into focus. Besides education, there’s customer service: French call-center operator Teleperformance SE warned last week that 20% to 30% of its call volumes could be automated in the next three years as chatbots become mainstream. The forecast helped push the stock down 14%.

“Management teams and investors, as well as regulators, the world over, are all wrestling with how ChatGPT could change business models,” said Russ Mould, investment director at AJ Bell Plc. “No one knows what is coming next or when, something that investors need to consider when they assess the valuation of any stock they hold or are researching.”