I've been tracking failing tech stocks since the dot-com bust, and let me tell you—Chegg's downfall is something special. Not in a good way.
When a company's stock nosedives 92% from its all-time high, you'll inevitably hear value investors muttering about "buying opportunities" and "mean reversion." It's almost Pavlovian. But Chegg? This isn't your garden-variety correction. It's corporate free-fall.
Chegg shares now hover around 80 cents—pocket change compared to their stratospheric 2021 peak of $96.53. And here's the kicker: that pitiful 80 cents isn't even scraping the 52-week low of 40 cents. We're witnessing what marine biologists might call the bends, except for corporations—decompression is proving fatal.
So what the hell happened?
In short, ChatGPT landed like an asteroid in Chegg's ecosystem. Classic disruption, folks. The kind business schools will be dissecting for decades while MBA students nod sagely, thinking "I would've seen it coming." (No, you wouldn't have.)
Chegg built its entire business around helping students with homework and test prep. Then suddenly—practically overnight—generative AI appeared offering the same services instantly, free, and often better. Talk about your textbook definition of "oh, crap."
The company's trajectory reminds me of those nature documentaries where a perfectly adapted species encounters an invasive predator. There's that moment of recognition, followed by... well, extinction isn't pretty.
What's particularly fascinating (in that car-crash-you-can't-look-away-from sense) is how quickly Wall Street spotted the existential threat. Sometimes the market takes ages to price in technological obsolescence—remember how long Blockbuster lingered?—but not here. When CEO Dah Madan admitted in May 2023 that ChatGPT was hurting customer growth, investors stampeded toward the exits.
I spoke with several former Chegg shareholders who confirmed they didn't even wait for the next earnings call. "The writing wasn't just on the wall," one told me, "it was flashing in neon with sirens attached."
The death spiral since then has been grimly predictable. Fewer subscribers led to shrinking revenue, forcing cost-cutting, which degraded services, driving away more subscribers... wash, rinse, repeat until you're essentially a penny stock with a Wikipedia page.
Look, this is what I call the "no contingency plan" disaster. Some business threats simply can't be managed once they emerge. Chegg apparently never developed a Plan B for a world where their core service became instantly commoditized. There's a lesson here about building businesses with technological moats so shallow my kid could wade across them wearing platform shoes.
For investors still eyeing that "cheap" stock price—stop it. Just stop. Sometimes the market isn't irrationally pessimistic; it's being perfectly rational. The business fundamentals have permanently shifted, and no amount of wishful thinking will restore the old order.
Could Chegg still have a future? I mean... technically? Perhaps. But it would require completely reinventing their business model, not just trimming expenses or slapping "AI-powered" on their marketing materials. When your entire reason for existing has been undermined, you can't just tweak your way back to relevance.
Having covered numerous tech implosions since the early 2000s, the broader question worth pondering is this: how many seemingly stable businesses are just one innovation away from becoming corporate fossil fuel? How many CEOs are currently assuring themselves "it can't happen to us" while technological wolves are already inside their perimeter?
Not all stocks recover. Some companies simply fade away, becoming case studies in what not to do. Creative destruction isn't just some abstract economic theory from your college textbook—it's the lived reality of countless businesses that once seemed unassailable.
For those still holding out hope for Chegg's miraculous recovery? You might want to skip straight to the "acceptance" stage of grief.
Sometimes, a falling knife isn't worth catching—especially when it's already embedded in the floor.
