Business Insider Reddit is set to join the S&P 500. The sprawling collection of message boards has made the site a valuable source of raw material in the age of AI.
- Reddit will join the S&P 500, catapulting into the ranks of America's most prominent companies.
- Shares surged on Friday, as investors cheered the inclusion in the benchmarkindex. - Reddit's sprawling collection of message boards have made it a valuable resource in the age of AI.
Reddit, the internet destination for the discussion of probably anything you can think of, has been launched into the ranks of America's most prominent companies.
Reddit will join the S&P 500 on August 18. While the site offers a version of the internet that's a throwback to its primordial beginnings, it's recent rise is also partly rooted in the AI explosion that's propelled markets since 2022. The sprawl of freewheeling message boards has helped Reddit grow a portfolio of data-licensing deals with other tech companies looking to use the site's content to train artificial intelligence models.
Reddit is also a nearly limitless well of searchable content prized by the likes of Google, while brands value the message boards for their marketing insights and advertising opportunities.
The forums get their fair share of ridicule (much of it from Redditors themselves) as hive of trolls and other unsavory internet characters, but over the years, its users have affected real change. They've solved crimes and identified cryptids. WallStreetBets is credited with helping organize a day-trader movement that sent shares of GameStop soaring and sank a hedge fund in the process.
Reddit stock surged as much as 17% on Friday as investors cheered its inclusion in the S&P 500. The stock is down 25% for the year, but shares have more than tripled since May 2024, when the company announced a deal to share its content with OpenAI.
The company struck its first licensing deal with Google in February 2024, just before its IPO. That partnership involves Reddit giving the search engine access to its data for model training, and is valued at $60 million a year, Reuters reported.
Reddit's Revenue soared 61% to $805 million in the second quarter, marking the eighth straight quarter of annual revenue growth of more than 60%. Ad revenue grew 64% year-over-year.
The irony of Reddit's rise from chaotic internet town square to AI resource hasn't been lost on Redditors themselves, who took to the site's own forums to post memes and celebrate the company's addition to the S&P 500.
"I think that means we are a real business now," one user wrote on r/redditstock.
"Best day in Reddit history," another user said.
Much of the stock's recent volatility has centered on fears that its AI deals could dissolve or that the site's ad revenue could be harmed as AI chatbots divert traffic to the site.
Shares slid 8% last month on reports that Reddit has had internal discussions about whether to revoke Google's access to its data when its partnership with the tech giant comes up for renewal. Comments from CEO Steve Huffman on the latest earnings also hinted at volatility in search traffic.
"We're proud to be added to the S&P 500, recognizing the growth, momentum, and consistency we've established as a public company," Drew Vollero, Reddit's chief financial officer, said in a statement. "Reddit's raw materials are special."
Reddit did not immediately respond to a request for comment from Business Insider.
Business Insider Get AI news in your inbox
Daily digest of what matters in AI.
Key Terms Explained #
Artificial Intelligence The science of creating machines that can perform tasks requiring human-like intelligence — reasoning, learning, perception, language understanding, and decision-making.
Benchmark A standardized test used to measure and compare AI model performance.
OpenAI The AI company behind ChatGPT, GPT-4, DALL-E, and Whisper.
Training The process of teaching an AI model by exposing it to data and adjusting its parameters to minimize errors.