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Reddit Partnership with OpenAI Boost Share Prices

The move to join forces with the AI firm is another significant milestone for Reddit following its IPO

May 17, 2024 11:43 AM

Reading time: 2 minutes, 18 seconds

TL;DR Shares of Reddit Inc. (NYSE: RDDT) surged 14% after the company announced a data-sharing agreement with OpenAI. The collaboration aims to enhance advertising revenue and integrate AI features for Reddit users.

Shares of social media giant Reddit Inc. (NYSE: RDDT) witnessed a staggering 14% surge shortly after the company unveiled its collaboration with OpenAI, the brains behind the popular chatbot ChatGPT.

In a blog post published Thursday, the company announced a groundbreaking data-sharing agreement with the artificial intelligence firm, promising substantial benefits for Redditors and ChatGPT users.

A Record-Breaking Performance

Shortly after the announcement, RDDT, which had been on a downward trend since the market opened on May 16, quickly turned around. According to Google Finance, the stock surged to $64.22 in after-hours trading, marking a substantial recovery from the 5.5% drop at the market's close.

This surge marks the second time the company's stock has experienced a significant uptick due to its accomplishments. Earlier this month, Reddit released its quarterly financial earnings report for the first three months of 2024, revealing record-breaking user traffic and increasing revenue. In response, the shares surged by 13%. Similarly, RDDT rose 48% in March on the news of a potential listing on the NYSE Market.

In the past month alone, Reddit's shares have witnessed an astounding rise of approximately 35%.

This performance shows the growing confidence and enthusiasm surrounding the company's recent developments since its initial public offering (IPO) in March.

Reddit Chooses OpenAI as Advertising Partner

Under the collaboration with OpenAI, which contributed to the RDDT surge on Thursday, Reddit said it had selected the company as its advertising partner. The move comes after the company reported over-than-expected ads revenue of $222.7 million, disappointing analysts' expectations at the Bank of America.

The figure represents an increase of 39% year over year. In total, the company's Q1 revenue for 2024 stood at $243 million, with the majority coming from advertising. The figure shows a 48% surge compared to the same period last year.

The partnership with OpenAI aims to help the firm increase its earnings. As part of this arrangement, Reddit will grant OpenAI access to its Data API, enabling real-time access to content posted on the platform. The move aims to integrate Reddit content into ChatGPT and upcoming products seamlessly.

OpenAI, on the other hand, will provide Reddit users and moderators with a range of new AI-powered features designed to enhance user engagement. Both companies will work together to introduce AI features to Redditors and moderators, enabling the AI models to learn more about the content posted on the platform.

Not the First

Meanwhile, this is not the first time Reddit has partnered with other companies looking to explore the company's data for AI training.

In February, Reddit partnered with Google to provide the tech giant with more "efficient ways to train" its AI models.

Like OpenAI, the deal will provide Google access to Reddit's data API, which delivers real-time content from Reddit's platform. According to reports, Google paid $60 million to obtain the training data from Reddit.

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