Reddit has announced a new partnership with OpenAI, allowing the popular chatbot ChatGPT to access Reddit's content. The partnership caused Reddit's shares to surge by 12% in extended trading, and it is part of Reddit's strategy to diversify its revenue streams beyond advertising, complementing its recent agreement with Alphabet, which enables Google's AI models to use Reddit's data.

OpenAI will utilise Reddit's application programming interface (API) to access and distribute content, marking a big step in integrating AI with social media data. Additionally, OpenAI will serve as a Reddit advertising partner, potentially boosting Reddit's advertising revenue.

Why does it matter?

The development follows Reddit's IPO in March and its lucrative deal with Alphabet worth around$60 million annually. Investors see these partnerships as crucial for generating revenue from data sales, supplementing the company's advertising income. Reddit's recent financial reports indicate strong revenue growth and improving profitability, reflecting the success of its AI data deals and advertising initiatives. Consequently, Reddit's stock has risen by 10.5% to$62.31, showing a significant increase since its market debut.