Thomas Lyons 
The rise of artificial intelligence (AI) is starting to show its downside, as California-based education company Chegg saw a plunge in its shares after warning that the rapid popularity of the ChatGPT tool is causing a decline in the number of students signing up for its services. The ripple effect is spreading, with UK education publisher Pearson experiencing the most significant drop in more than a year. While AI has been viewed as a boon for stocks, with investors bidding up shares of Nvidia, Microsoft, and Google, the potential losers are now coming into focus.
French call-centre operator Teleperformance warned that 20% to 30% of its call volumes could be automated in the next three years as chatbots become mainstream. The management teams, investors, and regulators are grappling with how ChatGPT could change business models, says Russ Mould, investment director at AJ Bell. He adds that the uncertainty of what is coming next or when it will happen is something investors need to consider when assessing the valuation of any stock they hold or are researching.
However, some companies will benefit from AI by using it to reduce costs. IBM expects to pause hiring for jobs it thinks could be replaced with artificial intelligence in the coming years. Publishing is an area where AI can generate copy and support time-stretched editorial teams. AI’s ability to answer questions quickly could increase the time users spend on a search engine home page, rather than clicking away to find what they want. This is good for the search engine but less good for websites relying on click-throughs, which could hit their ad income or any affiliate revenues from commissions generated by those click-throughs.
Shares in Chegg dropped by as much as 49% in the latest session, while Pearson declined 11% in London trade. Fellow education stocks were also slipping, with Duolingo falling as much as 12%, Adtalem Global Education sliding almost 10%, and 2U down almost 11%, among other peers. Some of Tuesday’s stock market moves may be an overreaction, said Aidan Donnelly, head of equities at Davy. He added that the need for education has not changed in the long term and that the reaction in some of the share prices is probably an overreaction based on the sentiment in the market in the very short term.
While the euphoria around AI has been viewed as a boon for stocks, the potential losers are now coming into focus. Investors have bid up shares of Nvidia, which is a key supplier of chips required to power chatbots, and tech giants Microsoft and Google are racing to incorporate more generative AI features in their products. However, the rapid popularity of ChatGPT tool is causing a decline in the number of students signing up for Chegg’s services, which is driving shares of UK education publisher Pearson down the most in more than a year. The management teams, investors, and regulators are grappling with how ChatGPT could change business models, says Russ Mould, investment director at AJ Bell. He adds that the uncertainty of what is coming next or when it will happen is something investors need to consider when assessing the valuation of any stock they hold or are researching.
French call-centre operator Teleperformance warned that 20% to 30% of its call volumes could be automated in the next three years as chatbots become mainstream. However, some companies will benefit from AI by using it to reduce costs. IBM expects to pause hiring for jobs it thinks could be replaced with artificial intelligence in the coming years. Publishing is an area where AI can generate copy and support time-stretched editorial teams. AI’s ability to answer questions quickly could increase the time users spend on a search engine home page, rather than clicking away to find what they want. This is good for the search engine but less good for websites relying on click-throughs, which could hit their ad income or any affiliate revenues from commissions generated by those click-throughs.
Shares in Chegg dropped by as much as 49% in the latest session, while Pearson declined 11% in London trade. Fellow education stocks were also slipping, with Duolingo falling as much as 12%, Adtalem Global Education sliding almost 10%, and 2U down almost 11%, among other peers. Some of Tuesday’s stock market moves may be an overreaction, said Aidan Donnelly, head of equities at Davy. He added that the need for education has not changed in the long term and that the reaction in some of the share prices is probably an overreaction based on the sentiment in the market in the very short term.
