Analyst talks up Reddit’s value as a source for AI

Reddit shares continue to romp on relatively little news in early trading, with the stock up more than 20% over the last three days, as of just before 12:30 p.m. ET.

As noted, Reddit has all the ingredients to make a squeeze-y stew: a recent surge of options activity, relatively high short interest, and a sprinkling of spicy chatter from retail traders on r/WallStreetBets.

But yesterday, analysts at brokerage firm B. Riley Securities also published a note spotlighting some potential upside for the stock based on Meta’s recent roughly $15 billion deal for Scale AI, a US-based startup that essentially tags and labels data that AI models need to digest.

B. Riley analysts wrote:

“While Scale AI’s curated data labeling services used for LLM training differ from Reddit’s content, we note that Reddit’s 10M daily posts+ user signals and a corpus of 1B+ posts/16B+ comments also offer a unique training dataset, and the intrinsic value of the dataset may not be reflected in the stock’s valuation today. We believe that RDDT’s platform DAUs essentially provide data annotation through user-generated content (posts, comments), upvotes/downvotes, and content moderation.

...Reports of Scale AI’s key customers’ plans point to value of independent training data sets such as Reddit, in our view. According to media reports, Google, which was expected to pay Scale AI ~$200M in 2025, plans to cut its ties with Scale AI post-deal. Other large tech companies — Microsoft and xAI, are also reportedly considering moving away from Scale AI. Scale-AI’s ability to service many large LLM players also points to the importance of independence of data providers such as Reddit.”

Of course, there’s always the chance that Meta is simply wildly overpaying for Scale AI, which would change the analysis somewhat. But it will take a long time to figure that out. In the meantime, the market does seem to be putting a premium on potential sources of feedstock for AI to devour.