Reddit Stock Soars After Company Inks Partnership With ChatGPT Owner OpenAI

Watch This Key Price Level

Key Takeaways

• Reddit shares soared nearly 12% in extended trading on Thursday after the social media company announced a partnership with ChatGPT owner OpenAI.
• Under the partnership, Reddit will give OpenAI access to its API to train AI models in exchange for certain OpenAI-powered features being offered to Reddit’s users and moderators.
• The deal indicates Reddit is continuing its efforts to diversify revenue outside its traditional advertising business.
• A volume-backed breakout in Reddit shares above their record high at $74.90 opens the door for the stock to test higher price levels.

Reddit (RDDT) shares soared nearly 12% in extended-hours trading Thursday after the company announced a partnership with OpenAI that allows the ChatGPT owner to train its artificial intelligence (AI) models using the news aggregation social network’s content.

Reddit will give OpenAI access to its application programming interface (API), which provides access to its real-time, structured, and unique content, in exchange for certain OpenAI-powered features being offered to Reddit’s users and moderators. In addition, Reddit will also add OpenAI as an advertising partner.

“Reddit has become one of the internet’s largest open archives of authentic, relevant, and always-up-to-date human conversations about anything and everything,” Reddit CEO Steve Huffman said in a statement released late Thursday. “Including it in 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,” he added.

Reddit struck a similar deal with Google earlier this year in which it allowed the internet search giant’s AI models, such as Gemini, to make its content available for training via the platform’s API. Investors reacted warmly to the latest licensing partnership announced Thursday as it indicates the social media company continues to diversify revenue outside its traditional advertising business.

OpenAI co-founder and CEO Sam Altman is no stranger to Reddit. In 2014, he led the social media company’s $50 million Series B funding round, while investing an additional $60 million over two financing rounds at the height of the pandemic-era tech rally. Altman also sat on the company’s board until 2022 and has a major shareholding in the stock valued at around $750 million after Thursday’s post market jump.

Monitor This Key Price Level Amid News-Driven Buying

Reddit shares jumped out of the gate after listing in late March but quickly ran into selling pressure after more than doubling from their $34 initial public offering (IPO) price. From mid-April, the stock started to make a V-shaped recovery after forming a bullish engulfing pattern in the high $30s/low $40s. 

Amid further upside after the OpenAI partnership, investors should keep a close eye on the stock’s record high at $74.90. A volume-backed breakout above this closely watched chart area opens the door for the shares to move into uncharted waters and test higher price levels.

Reddit rose 11.7% to $63.00 in after-hours trading.

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