The market has just lately moved on from all issues synthetic intelligence (AI), focusing as an alternative on world commerce and tariffs. However within the background, the AI revolution continues apace and is disrupting some companies. One is Chegg (NYSE: CHGG), which was buying and selling for $113 in 2021 however is now priced as a penny share at $0.75.

That’s a surprising four-year decline of 99%!

An instance of disruption

Chegg is an schooling know-how firm that provides companies like textbook leases, homework assist, and examine sources. Its clients are primarily faculty and highschool college students. 

Nevertheless, as we all know, generative AI bots like ChatGPT now — considerably controversially — supply free assist with homework and essays, undermining Chegg’s worth proposition. Principally, college students appear to be considering: ‘why pay for Chegg when AI gives you free answers?’

In 2023, administration stated: “Since March we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate.”

Chegg was proper. In two years, its subscribers have gone from 5.1m to three.2m, with income falling from $188m to $121m in that point. Worryingly, its money place has fallen from $281m in Q1 2023 to simply $44m on the finish of March (and it’s now loss-making).

To attempt to enhance issues, the corporate is drastically chopping prices and exploring being acquired. Maybe that may salvage some worth (the market cap is now simply $79m).

It’s additionally licensing its question-and-answer pairs to language mannequin firms, although that seems to be a double-edged sword to me. Sure, it’s producing income by leveraging proprietary schooling knowledge, however giving AI firms its content material may cannibalise the core subscription enterprise.

Right now (12 Could), Chegg’s administration wrote: “We believe the trends impacting our business will worsen before they get better.”

These “trends” are, in fact, primarily declining subscribers as a result of competitors from generative AI.

AI isn’t a single occasion

Many individuals have likened AI to the web, but it surely does seem totally different to me.

Whereas revolutionary, the web was a one-time platform shift. However AI isn’t a single watershed second. Reasonably, it’s a self-improving power, continuously studying and evolving, maybe exponentially. 

Consequently, I anticipate much more disruption — and potential alternatives — within the years forward.

This inventory seems in no hazard from AI

In fact, there will probably be some companies that AI received’t damage. It ought to even make them extra environment friendly and worthwhile. Many of those could be discovered within the FTSE 100, together with miners, world banks, and oil giants.

One UK inventory that is perhaps value contemplating is AstraZeneca. It’s down 16% since March as traders fear in regards to the Trump administration’s drive to decrease drug costs within the US. This can be a danger value mentioning, because the US is AstraZeneca’s largest market.

Nevertheless, by way of AI, the know-how may truly turbocharge the corporate’s drug discovery course of. Not solely that, however AstraZeneca has the wherewithal to essentially spend money on its AI capabilities, not like most smaller upstarts.

To me, the agency seems extra prone to profit from AI than be threatened by it. With the inventory buying and selling at an affordable 15 occasions ahead earnings, I believe it’s value a glance.