Reddit stock plunges on lack of new AI deals and user metric disappointment

What happened: Reddit stock plummeted 23% on May 12, 2023, following its Q2 earnings report. Despite beating revenue, profit, and guidance estimates, U.S. daily active users slipped sequentially for the first time in five quarters, raising concerns about user growth. Additionally, the company did not announce any new AI data licensing agreements, disappointing investors.

Market impact: The tech sector, particularly social media platforms, was affected. Reddit's user metric disappointment and lack of new AI deals raised questions about its growth prospects, pushing investors to reassess its valuation. The stock's decline may also impact retail traders' sentiment, as seen in the split opinions on Reddit's stock on its own platform.

What to watch next: Reddit's Q3 earnings report, scheduled for late July or early August, will be crucial. Investors will closely monitor user growth trends and any updates on AI data licensing agreements. Additionally, Google's AI search developments, which could impact Reddit's traffic, will be a key factor to watch.