AI race drives down stock valuations of education companies

The artificial intelligence race is already producing losers. On Tuesday, education companies listed on the London and New York stock exchanges saw hundreds of millions erased from their valuations after Chegg, a US company that provides online help to students with writing and math assignments. , said ChatGPT was hurting customer growth.

The firm said it had seen a “significant increase” in student technology use and withdrew its earnings guidance for the rest of the year, warning that revenue had already taken a hit. Shares nearly halved in value. The ripples were felt in London, where shares of education giant Pearson closed down 15%.

ChatGPT has become a phenomenon since its launch in November thanks to its ability to generate a variety of plausible-sounding responses, even in the form of academic essays, to text messages. It reached 100 million users in two months. Now it is starting to have an impact on businesses.

Fears about the unintended consequences of the uncontrolled development of AI led to the publication in March of a letter, the signatories of which included Elon Musk and Steve Wozniak, the co-founder of Apple, calling for a moratorium on the creation of giant “AI” during at least six months. He alluded to economic impacts and asked if we should “automate all jobs, including those that comply.”

As governments and private companies behind generative AI are implored to act, change is already happening.

The tech industry has been surprised by the adoption of ChatGPT and other generative AI tools, says Dr Andrew Rogoyski of the Institute for Human-Centric AI at the University of Surrey.

“In the long run, I think humans will adapt, but in the short term we are talking about companies having to adapt over a period of weeks rather than months and years. I think it has the potential to cause harm,” he says, adding that there is a gap between the speed of disruption caused by these AI advances and humanity’s ability to adapt and change.

This week, a British computer scientist described as the godfather of AI, Geoffrey Hinton, resigned from Google, warning of the technology’s impact on the job market and the “existential risk” posed by creating true digital intelligence.

The World Economic Forum, the organization behind Davos, said this week that it expected technological changes, including AI, to cause “significant” disruption to labor markets. WEF surveyed more than 800 companies with 11.3 million employees, and 25% of them said they expected AI to drive job losses, though 50% said they expected it to spur job growth. In March, Goldman Sachs said that recent advances in AI could lead to the automation of around 300 million full-time jobs, with lawyers and administrative staff among those affected.

Announcements like Chegg’s are turning these predictions into immediate reality. While Pearson recouped half of his losses in early trading on Wednesday, Chegg only rallied 5%, holding well down after Tuesday’s 48% drop.

Even the head of Google, which launched a rival ChatGPT, has said the speed of AI development is keeping him up at night. And it’s being driven by the private sector: According to the annual AI Index Report, the tech industry produced 32 significant machine learning models last year, compared to three produced by academia. Business imperatives will speed up the AI ​​race and make regulatory efforts seem even slower.

One of the criticisms of the moratorium letter, made by the Distributed AI Research Institute, was that it ignored the “real harms resulting from the deployment of AI systems today.” As Chegg’s warning showed, the interrupt is already here.

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