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Why AI Worries Led to Coursera Stock Plummeting This Week

Motley Fool - Fri May 5, 2023

What happened

This week was not kind to education stocks. Exhibit A: the performance of sector mainstay Coursera(NYSE: COUR). The company's share price sank by almost 12% over the course of the five trading days, according to data compiled by S&P Global Market Intelligence, but it wasn't its own fault.

So what

As for-profit education as a viable and populated stock market sector is a relatively new phenomenon, companies in the grouping can move in tandem at times. That's what broadly happened this week, which was unfortunate as one of their number sounded a warning about artificial intelligence (AI) and the effect on its business.

That company was Chegg, which on Tuesday unveiled its latest set of quarterly earnings. Although the company notched a beat on the bottom line, its comments about ChatGPT -- the hot AI technology of the moment -- were concerning.

Although Chegg saw little impact from ChatGPT at the start of 2023, the situation seems to be rapidly changing. In its earnings release the company wrote that "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."

Since Coursera and other education stocks swim in the same waters as their peer, investor alarm quickly spread to those issues. Coursera wasn't the only sector title to suffer a double-digit share-price loss during the week.

Now what

These concerns are certainly warranted, as ChatGPT is robust enough technology to produce tidbits of education on nearly any subject imaginable. Coursera, Chegg, and other education purveyors are going to have to get smart, and quickly, about how they'll counter this potential challenge to their businesses.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy.

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