Reddit Shares Surge by 15% Amid OpenAI Partnership

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Key Takeaways

  • Reddit shares spike by 12% to near record high after news of the partnership.
  • The mega-site will bring content to ChatGPT, and introduce AI features on its platform.
  • OpenAI to benefit from Reddit’s Data API, after similar Reddit-Google deal.

Reddit has confirmed a partnership with OpenAI to bring content from the platform to ChatGPT

The company aims to move beyond advertising as its main revenue driver. The announcement sent Reddit’s share price up by 15% on May 17 at the market opening.

Reddit shares soar | Source: Yahoo Finance
Reddit shares soar | Source: Yahoo Finance

Reddit is a San Francisco-based mega-website combining elements of social media, message boards, and news aggregation. It was founded in June 2005 by Steve Huffman and Alexis Ohanian, who sold the platform to Condé Nast the following year. Huffman left the company in 2009 before returning as CEO in 2015.

In a press release, Huffman stated, “Connecting Reddit to ChatGPT upholds our belief in a connected internet, helps people find more or what they’re looking for, and helps new audiences find community on Reddit.”

OpenAI will be able to access Reddit’s Data API, “which provides real-time, structured, and unique content from Reddit,” while the social media site will be able to roll out selected AI features to users and moderators, powered by OpenAI, which will now be an advertising partner on the platform.

Investors have backed Reddit thanks to its willingness to trade with its data for AI training purposes and to diversify income streams beyond advertising. This was one of the main drivers of demand for shares when the company floated on the New York Stock Exchange with its March IPO.

Prior to this landmark event, the company is said to have secured a data-sharing deal with Google’s parent firm, Alphabet, worth an estimated $60 million per year. The agreement will utilize content to train Google’s AI models.

In two decades, Reddit has never returned a profit, while last year saw a net loss of $91 million.

OpenAI chief Sam Altman is a former board member and current major shareholder in Reddit. His holding value rose to around  $750 million after the surge on May 16.