Reddit soars after announcing OpenAI deal that allows use of its data for training AI models

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The trading floor of the New York Stock Exchange prepares for the social media platform Reddit's initial public offering in New York City on March 21, 2024.

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Reddit shares surged 11% in extended trading on Thursday after the social media company announced a partnership with OpenAI that will allow the ChatGPT maker to train its artificial intelligence models on Reddit content.

As part of the deal, OpenAI will gain access to Reddit's Data application programming interface, or API, "which provides real-time, structured, and unique content from Reddit," according to a release.

In exchange, Reddit will begin offering certain AI features to users and moderators, powered by OpenAI, which will also become a Reddit advertising partner. Google announced a similar partnership with Reddit in February, allowing the company to train its AI models, such as Gemini, on Reddit content via access to the platform's API.

"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," CEO Steve Huffman said in Thursday's release. "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."

OpenAI CEO Sam Altman is a former board member and major shareholder in Reddit, with a stake valued at about $750 million after Thursday's pop. OpenAI Chief Operating Officer Brad Lightcap spearheaded the deal, which was approved by the company's board, the release said.

Earlier this week, OpenAI launched a new AI model and desktop version of ChatGPT, along with an updated user interface, the company's latest effort to expand use of its popular chatbot. The update brings GPT-4 to everyone, including OpenAI's free users, Chief Technology Officer Mira Murati said Monday in a livestreamed event.

Murati said the new model, GPT-4o, is "much faster," with improved capabilities in text, video and audio. OpenAI said it eventually plans to allow users to video chat with ChatGPT.

For Reddit, the deal provides another spark following a rally on Monday and Tuesday tied to a broader surge in so-called meme stocks such as GameStop. Reddit, which went public in March and reached a record close a few days after its initial public offering, is back to trading near its high of $65.11.

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