The GenAI Bloodbath: Which Stocks Are Being Decimated (And Who's Next)
Our latest coverage focuses on how generative AI is rapidly undermining the competitive moats of certain publicly traded companies—from education to media to stock photography
At Altbridge AI, we filter through mountains of financial filings, earnings calls, and real-time industry data to distill the signals that matter. Our latest coverage focuses on how generative AI is rapidly undermining the competitive moats of certain publicly traded companies—from education to media to stock photography—and identifying which players could be next in line.
Key Takeaways
Generative AI has already crushed the core business models of companies such as Chegg and BuzzFeed, sending share prices down 80%-90%
Stock-media incumbents like Shutterstock and Getty Images are merging to fight back against AI-generated images, betting that scale and licensed data can protect revenues
Online freelance platforms (Upwork, Fiverr) and legal/document-drafting sites (LegalZoom) struggle with valuation de-ratings as markets worry AI can replace human services
Customer support and call center providers (TEP, TTEC, CNXC, FIVN) face 60%-90% stock price hits amid rising investor skepticism over AI "virtual agents" threatening large segments of their business
Some players, like Duolingo, have weathered the AI storm by integrating GPT-4 into their offerings—showing that adaptation may still pay off
The broader economic question: if AI-induced disruption widens, could we see a wave of layoffs, earnings downgrades, and potential recessionary pressures?
Chegg (CHGG): From $100+ to Near-Penny Stock in Two Years
Few companies have experienced AI disruption as drastically as Chegg. Long hailed as the go-to subscription service for textbook homework solutions, Chegg saw sudden subscriber declines once students realized that ChatGPT could answer many questions instantly—and for free.
• The Impact: Chegg's Q1'23 results revealed a startling drop in new-student sign-ups right as ChatGPT mania took off. The company abruptly withdrew full-year guidance, and the stock fell 50% in one day.
• Recent Numbers: By Q3'24, Chegg had lost over half a million subscribers over 12 months, with revenue shrinking at a double-digit pace. Management laid off 21% of its workforce, openly blaming AI chatbots for eroding Chegg's core value proposition.
• Attempted Comeback: Dubbed "CheggMate," Chegg's partnership with OpenAI is meant to offer a more tailored, GPT-4-powered tutoring experience. But so far, it has not reversed subscriber losses. Investors fear that offering "AI answers" behind a paywall simply can't compete with free large language models.
BuzzFeed (BZFD): The Hype of "AI Content" Meets Grim Reality
BuzzFeed briefly sparked Wall Street enthusiasm when it announced it would use OpenAI's technology to generate quizzes and articles. The share price more than doubled—then quickly crashed.
• The News Division Reckoning: Within months, BuzzFeed shut down its entire News arm and laid off 180 employees. The CEO vowed to "lean into AI" for cheaper content production, yet the stock soon fell below $1 per share.
• Why the Collapse? Advertisers did not see AI-written listicles as a major draw, and the pivot to AI content was perceived as a last-ditch attempt to cut costs.
• Bigger Lesson: Commodity-style content is now among the easiest functions for AI to replicate. The market is highly skeptical that AI generation alone can sustain or revitalize digital media businesses.
Shutterstock (SSTK) & Getty Images (GETY): Stock Photo Giants Merge to Survive
Generative AI can produce custom images on demand—at lower cost than typical stock photo downloads. Faced with plunging website traffic (Shutterstock's traffic dropped 57% over part of 2023, while Getty's share price also tumbled after its SPAC debut), the two companies have taken drastic measures.
• The Merger: Shutterstock and Getty announced a $3.7B "merger of equals" to pool content libraries and invest heavily in AI-based image generation.
• AI Partnerships: Shutterstock struck a high-profile deal with OpenAI to supply training images and integrate DALL·E into Shutterstock's own platform. Getty partnered with NVIDIA to launch "Generative AI by Getty Images."
• Investment Outlook: Both stocks trade at depressed valuations relative to their history. Bulls argue that a combined Getty+Shutterstock can command higher pricing for "commercially safe," properly licensed image generation. Bears counter that open-source AI might eventually make licensed images less essential, leading to deeper declines.
Fiverr (FVRR) & Upwork (UPWK): Gig Platforms Under Siege by AI
Freelance marketplaces soared in the pandemic, but they've round-tripped gains amid concerns that generative AI can handle many of the simpler writing, design, and editing tasks that once went to human freelancers.
• Stock Performance: Both Fiverr and Upwork have dropped about 80%-90% from their peaks. While the 2021-22 tech rout was the primary reason, investor commentary frequently cites AI as an important concern.
• Counterpoint—New Demand: Interestingly, "AI implementation" and "prompt engineering" tasks have become some of the fastest-growing service categories on these platforms, suggesting that if these sites can pivot to specialized AI gigs, they could benefit.
• Ongoing Uncertainty: The question is whether the surge in AI-related contract work can outrun the decline in more traditional freelance tasks. Until gross services volume (GSV) re-accelerates, the market remains cautious.
LegalZoom (LZ): Do-It-Yourself Legal at Risk of "Free AI Docs"
LegalZoom's bread and butter is creating basic legal documents—wills, LLC agreements, trademark filings—for a fraction of a lawyer's billable rates. Yet ChatGPT and other large language models now generate passable versions of the same forms.
• Market Concerns: Analysts have flagged LegalZoom as potentially the next "Chegg scenario," with ChatGPT or other AI services offering no-cost document drafting. LegalZoom shares are already down about 60% from the IPO highs.
• Adaptation in Progress: The company has integrated AI to help attorneys produce documents faster and pass some cost savings on to customers—betting that "vetted legal solutions" will retain a trust premium over purely AI-generated text.
• High-Stakes Future: If Big Tech (e.g., Microsoft via GitHub Copilot or Google) introduces a user-friendly "AI legal adviser," LegalZoom's moat could vanish quickly. For now, the stock's depressed valuation reflects this looming threat.
Customer Support & Call Centers: The Next Frontier
Companies at risk: TTEC (NASDAQ: TTEC), Concentrix (NASDAQ: CNXC), Teleperformance (EPA: TEP), Five9 (NASDAQ: FIVN)
• Why It Matters: AI chatbots and "virtual agents" have improved dramatically at handling routine scripts, billing questions, and basic product support—core tasks for large call-center operators.
• Market Reaction: Already impacted by labor and macro pressures, some of these stocks lost ground in 2022–2023. As AI matures, investors worry about downsizing of live-agent teams.
• The Road Ahead: Providers that integrate advanced AI to reduce costs (rather than let clients build in-house bots) may endure. But ongoing margin pressure is almost certain.
Who Might Be Next?
Several industries built on "information mediation" or "formulaic content" appear vulnerable to the next wave of AI disruption. Watch for:
• Language tutoring & test prep companies that could follow the Chegg meltdown if their content is easily replicated by chatbots:
- Duolingo (NASDAQ: DUOL) – Well-known for GPT-4 integration, but open-source conversational tutors could loom
- Pearson (NYSE: PSO) – Major publisher and test-prep services, reliant on structured content that AI might replicate
• Tax preparation and bookkeeping software: Intuit has begun weaving AI into TurboTax and QuickBooks, openly acknowledging that AI-based returns and finances could become the norm:
- H&R Block (NYSE: HRB) – Human tax pros may see demand wane if automated solutions handle typical filings
• Media production and creative agencies where AI copy- and image-generation drastically reduce the need for junior-level creative staff:
- WPP (NYSE: WPP), Omnicom (NYSE: OMC), Interpublic Group (NYSE: IPG) – Large agencies claim AI will augment creative teams, but clients might produce simpler campaigns themselves using AI tools
Macro Risks: Could AI Trigger a Broader Downturn?
There's an emerging concern that if too many firms trim headcount—particularly in white-collar roles—due to AI, consumer spending and employment may suffer. The IMF warns that, in a recession, companies historically accelerate automation to cut costs. AI could amplify that effect, possibly prolonging any economic downturn.
In a more optimistic scenario, newly created jobs in AI development and data management offset losses, and productivity gains raise overall incomes. That future is far from guaranteed, however. Investors should monitor earnings calls for more signs of AI-driven cost cutting or revenue shortfalls.
Conclusion: Evaluating Risk vs. Opportunity
Not every "AI hit" stock is doomed—several of these companies are ambitiously pivoting, from forming AI partnerships to merging with competitors for scale. But the Chegg meltdown illustrates what can happen when a core offering becomes obsolete overnight.
The lesson for investors: Examine each firm's moat. If generative AI can replace the core product cheaply and effectively, it's time to tread carefully. If a company is using AI to unlock new offerings (and can leverage brand scale, proprietary data, and enterprise relationships), it might become a surprising winner. For now, these five stocks highlight the dangers of underestimating AI's disruptive power.
Thanks for reading another Altbridge AI Spotlight. We'll continue tracking these names in real-time, especially as Q4 and Q1 earnings guidance reveal just how quickly generative AI is transforming traditional businesses.
Disclaimer: This commentary is for informational purposes only and does not constitute financial advice. Investors should perform their own due diligence or consult a licensed professional before making any investment decisions.