Reddit (NASDAQ:RDDT) stock rose 11% overnight after the discussion site licensed its content to OpenAI for training large language models.
Under the deal, OpenAI will become a Reddit advertiser, and users will gain access to artificial intelligence (AI) features. The deal is similar to one signed with Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), which was said to be worth $60 million.
RDDT stock opened this morning at $60.62 per share, a market capitalization of $10 billion.
Data the New Gold. Hmmm…
The OpenAI deal may prove to be just the second or even third most important Reddit story of the week. The company hired a vice president for advertising from Google. It also brought back the reward system for users it scrapped late last year, admitting: “we messed up.”
In a blog post, Reddit said the OpenAI deal aligns with its Public Content Policy. The policy, among other things, forbids partners from spamming users and lets users delete their content.
Before the deal was announced, RDDT stock was trading at just 11% more than its first March trade, which was at $50.44 per share. The shares are now up 26% since the IPO.
The deal is another illustration of how AI companies are interacting with content players. While little money is changing hands, there are big promises of cooperation and future advertising.
Some traders at Stocktwits were not amused. One bear called the deal a gimmick that only benefits OpenAI. The overall rating on the stock there is neutral.
JMP Securities, however, reaffirmed its “outperform” rating on the stock, with a price target of $63 per share. JMP believes that data sales can be a $500 million business for Reddit. Deutsche Bank raised its price target to $65, with a “buy” rating. At Tipranks, RDDT stock is considered a moderate buy, with only one of the 16 analysts following it rating it a sell.
RDDT Stock: What Happens Next?
Selling ads will be more important to Reddit’s future than selling data. If the OpenAI deal can help Reddit do that, it’s a big win.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
