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AI Fears Boost Trade School Stocks
24 Apr
Summary
- Trade school stocks show significant gains, outperforming degree providers.
- AI's rise is making skilled trades seem more secure than white-collar jobs.
- Technical schools report strong revenue growth from increased enrollment.
Investor interest is increasingly shifting towards trade schools as concerns about AI replacing white-collar jobs grow. Lincoln Educational Services has experienced a 71% stock increase over the past six months, while Universal Technical Institute saw a 7% rise. This surge contrasts with an average 17% decline in stocks for degree-focused educational providers like Phoenix Education Partners, Perdoceo Education Corp., and Strategic Education Inc.
Analysts attribute this divergence to the proliferation of generative AI in the workplace, making traditionally white-collar roles appear vulnerable. Conversely, skilled trades such as HVAC installation and welding are perceived as less susceptible to AI disruption. This perception is altering long-held parental advice, with a renewed emphasis on vocational education.
The sector has also seen support from governmental initiatives aimed at reshoring manufacturing and bolstering vocational training. This evolving landscape has fueled impressive revenue growth for technical institutions, evident in Lincoln Educational Services' 18% revenue surge and Universal Technical Institute's 14% growth last year. Consequently, these trade schools now command significantly higher price-to-earnings multiples than their degree-granting counterparts, reflecting their newfound investor appeal.
