Pearson’s stock market value has been reduced by nearly £1 billion after a US competitor admitted that the rise of AI chatbot ChatGPT is harming its business.
Pearson’s stock market value has been reduced by nearly £1 billion after a US competitor admitted that the rise of AI chatbot ChatGPT is harming its business.
Pearson’s shares fell more than 15% on Tuesday, making it the biggest faller among London-listed companies, after Chegg, a California-based online learning service, reported a 5% drop in subscribers and lowered its full-year guidance.
“Since March, we have seen a significant spike in student interest in AI chatbot ChatGPT,” said Chegg CEO Dan Rosensweig, whose company’s share price nearly halved following the release of its first-quarter results. “We now believe it is affecting our new customer growth rate.”
Pearson, which reported first-quarter results that exceeded its own expectations last week, claims that its business is far more ChatGPT-proof than Chegg, which charges $19.95 per month for on-demand answers to college course questions. Pearson’s spokesperson stated, “Chegg is a fundamentally different company with a different business model.”
“We are a highly diversified company, with businesses other than higher education accounting for 80% of our profits.” Pearson+, the company’s subscription service, has grown threefold since last spring, according to the company.
“While ChatGPT may be seen as an alternative for students seeking answers to their homework, we do not see it as an alternative to Pearson’s text books, courseware, and learning platforms that provide trusted programmes that are adopted by colleges and must be followed and consumed by students for approximately 70% of higher education courses,” JP Morgan analysts said.
“The distinction is that Pearson provides the content and questions, whereas Chegg and ChatGPT provide the answers to those questions.”
Chegg has previously clashed with universities in the United States over claims that its technology allows students to submit answers that are not their own. CheggMate, a service built with ChatGPT-4, was launched by the company last month. “We are aggressively embracing [generative AI] and prioritising our investments to meet this opportunity,” Rosensweig said.
“Investors will inevitably be concerned about the readacross to Pearson as another supplier to the US higher Ed market,” said Citi analyst Thomas Singlehurst.
“Generative AI is an excellent tool for ‘cheating,’ but it is less effective (for the time being) for content creation and assessment.” Overall, it appears likely that it will have a short-term impact on sentiment in the broader educational services space.” Pearson shares fell 133 pence to 754 pence, valuing the company at £5.4 billion.