Reddit stock soars on OpenAI partnership

Shares of Reddit (RDDT) are jumping after announcing a partnership with OpenAI. As part of the deal, OpenAI will use Reddit content for ChatGPT and other products. In exchange, OpenAI will advertise on Reddit and Reddit will use OpenAI's models for its AI features.

In the video above, Yahoo Finance's Seana Smith and Brad Smith discuss why the deal is so important for Reddit.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video transcript

Another so that we're watching here today is Reddit.

We were just talking about the excitement surrounding A I.

Let's talk about this move that we're seeing in Reddit today because it's to do with A I, we're looking at gains of just about 9.5% here in the pre market.

Now, the move higher coming after the social network company announced a new partnership with Open A I under the agreement, open A I will have access to B Reddit's data, giving the artificial intelligence start up a chance to use Reddit's content in real time.

When we talked about the excitement surrounding Reddit following its IP O A lot of that excitement was driven by the A I potential and exactly what that means here for Reddit in the long term.

So on the heels of this licensing deal, to no surprise, we're seeing the stock move higher here in early trading and Brad, when you take a look at exactly what this means.

Ultimately here for Reddit, just quick glance at, at early analysts reaction here city's Ron Jose saying that open A I licensing deal showcases the quote, the value of its data corpus and open A I's agreement should provide chat G BT with a continuously refreshed source of human conversation at scale.

So they're looking at it as a win win here for both companies.

I mean, Reddit signaled it, reddit signaled it coming into the IPO.

This was in the S one filing that this was how they saw their business being monetized by partnerships like this.

I think the revenue sharing that they're able to enter into is really going to be the the stickier part of this for investors as they start to get some details in future earnings reports, just about how much in pass through revenue they're able to ultimately see and net out as a result of partnerships that are really gained from generative A I looking at the human and conversational element that takes place online indexing and ranking that ingestion of of data.

Um And so I think on top of the advertising realm that Reddit still does have and is more prominent at this juncture in its ad in its revenue base.

This generative A I kind of indexing of the data is that next major element that they talked about leading up to this IP O.

And once again, investors are gonna hear about that for a long, long time here.