Shares of Reddit (NYSE:RDDT)soared by nearly 15% on Friday following the announcement of a partnership with artificial intelligence firm OpenAI. The collaboration is anticipated to enhance advertising revenue for the social media platform.
The surge propelled the stock to $64.80, edging close to its record closing price of $65.11 achieved in late March, and added approximately $1.38 billion to the company’s market capitalization.
The partnership, unveiled on Thursday, enables Reddit to harness OpenAI’s technology to develop tools and features, while integrating Reddit’s content with OpenAI’s ChatGPT platform in a “real-time, structured” manner. Additionally, OpenAI will serve as an advertising partner for Reddit.
According to Piper Sandler lead analyst Thomas Champion, the deal could generate annual revenues ranging from $50 million to $60 million for Reddit.
Russ Mould, investment director at AJ Bell, remarked that the agreement aligns with Reddit’s IPO commitment to capitalize on AI-driven opportunities.
Since its debut in March at $34 per share, Reddit’s stock has surged by over 90%.
In a February filing, Reddit signaled its intent to explore new revenue streams beyond advertising, including offering creator tools and licensing its data to third parties. Already, Reddit has secured data licensing agreements with undisclosed entities, projected to contribute at least $66.4 million in revenue this year, facilitating third-party access, search, and analysis of data on the platform.
The partnership with OpenAI occurs amidst a surge in lawsuits against the latter, alleging unauthorized content usage for training large language models. OpenAI has recently inked content licensing deals with prominent publishers such as the Associated Press and the Financial Times.
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