Chegg, once a highly valued edtech company, illustrates how quickly a digital business can collapse when a disruptive technology replaces its core offering. The company built its success by providing homework help for a monthly fee of 14.95 dollars, becoming extremely popular among students during the COVID-19 pandemic, when online education and remote learning surged. This boom was reflected in February 2021, when its stock price reached 115 dollars and its market capitalization climbed to 14.7 billion dollars, signaling strong investor confidence in its subscription-based model.
However, the arrival of powerful generative AI tools such as ChatGPT and Claude fundamentally changed the landscape by offering instant answers for free, effectively rendering Chegg’s paid service redundant. In response, Chegg tried to reinvent itself by launching “CheggMate,” an AI chatbot trained on its proprietary database of homework solutions, attempting to compete directly with the new AI platforms rather than coexist with them.
This strategic pivot failed to regain users or investor trust, and the company entered a sharp decline marked by successive rounds of layoffs as it confronted what it described as the “new realities of AI.” In May 2025, 248 employees lost their jobs, followed by another 388 employees (representing 45% of its workforce)in October 2025, as the company scrambled to cut costs and stay afloat.
The financial consequences were dramatic: Chegg’s stock price fell to around 1.02 dollars, shrinking its market capitalization to approximately 114.59 million dollars and putting it at risk of being delisted from the New York Stock Exchange for failing to remain above the 1 dollar threshold. Once celebrated as a Wall Street favorite, the company became a cautionary example of how quickly AI can “wipe out” a business model that depends on information and routine problem-solving, especially when free, more capable alternatives emerge.
Reference
Small, J. (2026, April 29). This 14 billion business is officially the first company to be completely wiped out by AI. Entrepreneur. https://www.entrepreneur.com/business-news/this-14-billion-business-is-wiped-out-by-ai