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Reddit Joins the S&P 500: AI Data Deals vs. Traffic Threat

Reddit (RDDT) shares jumped 16% after the announcement of S&P 500 inclusion, though the stock remains down roughly 22% year-to-date. Reddit discussion this week focused on the company’s high-stakes balancing act—monetizing its data for AI while protecting the search-driven user growth that powers its ad revenue.

  1. Reddit joins the S&P 500 on August 18, replacing AvalonBay Communities. The stock surged 16% on the news.

  2. Retail investors are debating whether Reddit’s AI data deals with Google and OpenAI offset the risk that AI Overviews reduce Google search referrals to the platform.

  3. Q2 earnings showed robust growth: revenue of $805 million (+61%) and U.S. ad revenue +64%, supporting the bull case that monetization can outpace traffic shifts.

Reddit (

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$RDDT) is landing in the S&P 500 on Tuesday, a milestone that has reignited a fierce debate in the retail-investor community: Can the company keep growing its $36 billion market cap when the very technology that powers its AI licensing deals also threatens to erode the search traffic that feeds its ad business?

The AI Data Dilemma

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$RDDT is paid about $60 million per year by Google to train its AI models on Reddit conversations. That contract, up for renewal in 2027, is currently being renegotiated. Meanwhile, reports suggest a potential deal with OpenAI could push combined AI licensing revenue to $550 million annually. But a widely shared post on r/stockmarket lays out the catch: Google’s AI Overviews often answer user questions directly on the search results page, reducing the need to click through to Reddit. Referrals to other publishers like Politico and Business Insider have dropped 23–85% over the past year. As one Reddit user put it, “Reddit sells the training data that makes those answers good. Block Google and you lose the money plus your placement. Renew and you keep funding your own replacement.”

Bulls Point to Monetization Strength

The counterargument, echoed in r/ValueInvesting, is that Reddit’s Q2 earnings demonstrate monetization can outpace traffic headwinds. Revenue surged 61% to $805 million, ad revenue rose 64%, and U.S. revenue per user climbed 51% while daily active users grew just 6%. One user described Reddit’s moat as “addictive and valuable,” arguing the platform has no real competitor and could 10x from here. A r/investing post citing a Moneyweek column noted that analysts believe combined Google and OpenAI deals could dramatically boost profitability, calling the renegotiation a potential “make or break” moment.

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Amid the debate, a comparison piece from The Motley Fool on August 15 pitted

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$RDDT against Snowflake as the better 2026 growth buy. Reddit’s forward P/E of 30.1x and 69.4% revenue growth were seen as attractive relative to Snowflake’s 174.6x multiple, with the author recommending Reddit partly because “Google is reliant on Reddit’s data for AI.”

What Retail Investors Are Watching

Reddit’s S&P 500 entry is a clear catalyst, but the discussion on r/investing remains divided. The stock has slid 40% this year before the index news, and the AI traffic threat lingers. Bulls argue the company’s monetization gains and unique data licensing position make the risk worth taking. Bears warn that a Google renegotiation could expose just how dependent Reddit is on a single search partner.

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