What Happened?
Shares of online community and discussion platform Reddit (NYSE: RDDT) jumped 6.1% in the afternoon session after the company launched new interactive ad options, building on the positive momentum from its recent strong third-quarter earnings report. Reddit introduced “Interactive Ads,” a unique format that allows brands to create custom, engaging experiences like quizzes and countdowns directly within the platform's communities. This move aimed to attract more advertisers. The positive sentiment was also supported by the company's impressive third-quarter results from the previous week, which showed a 68% year-over-year revenue growth. A broader rally in the technology sector, with the Nasdaq composite gaining, also provided a favorable backdrop for the stock's move.
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What Is The Market Telling Us
Reddit’s shares are extremely volatile and have had 66 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 7% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally. The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Reddit is up 23.8% since the beginning of the year, but at $205.46 per share, it is still trading 24.1% below its 52-week high of $270.71 from September 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $4,073.
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