Chegg (CHGG) Plunges 99% as AI Tools Replace Traditional EdTech Services

Attiya Zainib

Wed, May 20, 2026 at 9:54 AM EDT 3 min read

Eagle Point Capital, an investment firm, released its “Spring 2026 Portfolio Update" investor letter. A copy of the letter can be downloaded here. The firm reported a resilient performance for the quarter while emphasizing its long-term, fundamentals-driven strategy, noting that detailed quarterly returns would be reflected in client brokerage statements but reaffirming steady compounding aligned with its historical approach. The firm attributed its stability to a disciplined focus on “cockroach-like” businesses, durable, mission-critical companies that benefit from timeless human needs, strong physical infrastructure, and limited susceptibility to rapid technological disruption. Despite an increasingly volatile and unpredictable macro environment shaped by geopolitical conflicts, inflation shocks, and rapid technological shifts like AI, Eagle Point expressed a constructive market outlook, arguing that uncertainty and periodic downturns create opportunities for long-term investors. The firm believes its emphasis on resilient industries, fragmented customer bases, and essential services positions the portfolio to withstand disruption and continue compounding over time, even as markets face ongoing volatility and structural change. In addition, you can check the Fund’s top five holdings to determine its best picks for 2026.

In its first-quarter 2026 investor letter, Eagle Point Capital highlighted stocks like Chegg, Inc. (NYSE:CHGG). Chegg, Inc. (NYSE:CHGG) is an education technology company that provides digital learning services, including textbook rentals, homework help, and online tutoring for students. The one-month return of Chegg, Inc. (NYSE:CHGG) was 5.83% while its shares traded between $0.4500 and $1.9000 over the last 52 weeks. On May 19, 2026, Chegg, Inc. (NYSE:CHGG) stock closed at approximately $1.05 per share, with a market capitalization of about $117.60 million.

Eagle Point Capital stated the following regarding Chegg, Inc. (NYSE:CHGG) in its Q1 2026 investor letter:

"Chegg, Inc. (NYSE:CHGG) is a panda with a cautionary tale. The company spent a decade building a database of 120 million answers to textbook questions and sold access to students for $20 per month. ChatGPT’s release in late 2022 disrupted Chegg’s business model overnight. It gave students instant, unlimited, and customized homework help for free. Students, notoriously tech forward and price sensitive, immediately cancelled their Chegg subscriptions en masse. Three years later Chegg’s stock has lost 99% of its value. Chegg provided a digital service predicated on information scarcity that technology erased. Chegg’s customers did not have any switching costs, so the pace of change was rapid and severe."