Edtech Investment Plummets as Generative AI Disrupts the Market

Global investment in online education companies has fallen to its lowest level in a decade as the industry comes under pressure from the rapid rise of free generative artificial intelligence tools that are undercutting their products. Edtech businesses, which offer services such as online tutoring and exam practice, received just $3bn of investment in 2024, compared with $17.3bn at the peak of the pandemic in 2021, according to data from PitchBook.

This is the smallest amount since 2014, when edtech companies attracted $2.3bn. The huge decline comes as edtech companies, which soared in popularity during the pandemic amid mass school closures, have struggled to maintain subscriber growth after the end of the Covid-19 emergency. It has been exacerbated by the fast development of generative AI over the past two years, which has further upended demand for edtech companies’ paid-for online learning tools and caused their valuations to plummet. “While edtech offers the potential to bridge the skills gap, many investors and learners feel that the platforms have failed to truly deliver on this promise,” said Sabah Baxamoosa, director of business development at entrepreneurship platform OneValley. However, investment in generative AI is booming. Investors have poured $51.4bn this year into the developing technology, up from $16.5bn in 2021, according to PitchBook. Chegg, a California-based edtech group, was one of the first companies to report a hit to its business from the launch of OpenAI’s ChatGPT, bringing the stock abruptly down from its pandemic high. Since then, the company has continued to struggle. In November, it announced it was cutting a further 21 per cent of its workforce, just six months after its last lay-offs. It reported a 13 per cent decline in subscribers to 3.8mn during the third quarter compared with a year ago. Chegg’s shares are down about 84 per cent this yea

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