FirstFT: AI hits edtechs | Financial Times

Good morning. Shares in the education sector fell sharply yesterday as investors bet that artificial intelligence could upend business models following a revenue warning at edtech company Chegg.

California-based Chegg, which provides online study guides, admitted that a “significant spike in student interest” in AI chatbot ChatGPT was starting to hurt its sales. The comments mark one of the first instances of a company acknowledging a hit to its finances as a direct result of generative AI.

Chegg’s shares plunged by half yesterday and the warning rattled other companies, with shares in London-listed Pearson falling 15 per cent, language-learning platform Duolingo down by 10 per cent and US-listed education company Udemy dropping by more than 5 per cent.

And here’s what else is happening today:

• Chinese and Japanese markets closed: Financial markets in both countries will be closed for public holidays.

• US interest rate decision: Officials expected to deliver another quarter-point rate rise, lifting the federal funds rate to a new target range of 5 per cent to 5.25 per cent, before considering a pause in further increases.

• Earnings: Companies reporting today include Airbus, BNP Paribas, Enel, Estée Lauder, Kraft Heinz, Lloyds Banking Group, Lufthansa, Prudential Financial and Qualcomm to name a few. More in our Week Ahead newsletter.

Five more top stories

1. Regional bank shares continued to slide despite the rescue of First Republic this week. Trading in PacWest, seen as one of the weakest of the midsized regional banks, was briefly halted for volatility and was down 28 per cent by late-afternoon in New York. A KBW index of regional bank stocks slid more than 5 per cent.

2. US short seller Hindenburg Research has unveiled a position against Icahn Enterprises, the publicly listed fund run by activist Carl Icahn, knocking its share price and setting up a battle between two of Wall Street’s most feared and outspoken investors. Read the details of Hindenburg’s report.

3. The Reserve Bank of Australia yesterday unexpectedly raised interest rates by 25 basis points to 3.85 per cent as inflation eased. The RBA said further rate rises may be needed as it looks to return inflation to the target range of 2 to 3 per cent.

4. The EU and US have warned Malaysia of risks to national security and foreign investment as the government finalises a review of its 5G rollout that could allow China’s Huawei a role in the country’s telecoms infrastructure.

5. Joe Biden said the US commitment to the Philippines was “iron clad” days after the American ally accused Beijing of dangerously harassing a patrol ship in the South China Sea. FT’s Demetri Sevastopulo has more from Marcos’ four-day visit to the US.

News in-depth

Over the past year, high energy prices have brought the global fossil fuel producers an extraordinary flow of wealth. In a new video, the FT’s Simon Mundy looks at the question this raises over their obligation to society and to the planet. For the latest in the debate around responsible business, Premium subscribers can sign up to our Moral Money newsletter.

We’re also reading . . . 

• ‘Men in black’: Due diligence is inherently risky in China, and it’s become more vital — and more hazardous as Beijing steps up scrutiny of corporate sleuths.

• Social media: A Twitter lookalike, backed by Jack Dorsey, has gained rapid traction among journalists and celebrities in search of an alternative platform.

• Big numbers: People are numb to millions, billions and trillions, but that is perhaps exactly what politicians want, writes Sarah O’Connor.

Chart of the day

Chinese initial public offerings have raised more than five times as much money as those in the US this year as a crop of new listings in the world’s biggest economy failed to appear after a dire 2022.

Take a break from the news

The Met Gala, technically a fundraiser for the Met’s Costume Institute, has over the years transformed into the fashion world’s Super Bowl. Take a look at some of the most eye-catching looks from this week’s event, which paid tribute to the late Chanel designer Karl Lagerfeld with humour and haute couture.

Additional contributions by Gordon Smith and Tee Zhuo