Reddit (RDDT) shares are under severe pressure Wednesday following reports of a high-stakes dispute with Google over artificial intelligence data licensing and search traffic. According to The Wall Street Journal, Reddit has threatened to block Google from scraping its platform for AI model training as the two parties negotiate a renewal of their existing data-licensing agreement.
The news comes at a time when Reddit stock was already struggling to maintain upward momentum. Year-to-date, shares are down nearly 30%, reflecting investor anxiety over the company's reliance on its partnership with the search giant.
Why Reddit Is Unhappy With Its Google Deal
In 2024, Reddit signed an estimated $60 million annual agreement allowing Google to ingest forum posts for AI training. However, the company is now threatening to walk away, raising concerns among investors that RDDT could lose a significant source of high-margin licensing revenue.
Reddit's primary frustration stems from Google's expanded AI Overview answer boxes at the top of search results. These AI-generated summaries answer user queries directly on the search page, drastically reducing the click-through traffic that Reddit relies on to fuel its core advertising business.
The broader tech sell-off has compounded the pressure on Reddit shares, as investors trim positions in high-flying software and chip names ahead of major mega-cap tech earnings. For context, see our coverage of Samsung's 7% Post-Earnings Drop Signals AI Rally Fatigue Ahead of Big Tech Reports.
What the Loss of the Google Deal Would Mean for RDDT Stock
Investors are bailing on Reddit shares primarily because the company faces a difficult dilemma as it negotiates a renewal of its agreement with Google. If RDDT licenses its human-generated discussions to a search engine, AI answer engines cannibalize its referral traffic. But if it cuts off access, it risks losing both licensing income and being de-ranked or hidden in standard search indexing.
Until there is more clarity on whether the licensing deal is renewed on favorable terms—or if Reddit can defend its organic search traffic—the market is treating the conflict as a headwind to both ad-revenue and data-licensing growth.
How to Play Reddit Shares as They Tumble
Reddit has grown at an attractive pace in recent quarters, largely on the back of its role in AI training. The company is expected to report $0.99 per share in earnings for its current financial quarter in late August, more than double last year's figure. That growth trajectory has kept Wall Street analysts bullish on RDDT stock for the remainder of 2026.
The consensus rating on Reddit currently sits at Moderate Buy, with a mean price target of $224, indicating potential upside of more than 30% over the next 12 months. However, things could change meaningfully if the agreement with Google falls apart, which is what is weighing on the share price today. For more on the broader AI landscape, see OpenAI, Google AI Access for Chinese Firms Intensifies US Export Control Debate.
Investors should also note that the tech sector is experiencing a broader rotation, as highlighted in our report on Dow Adds 230 Points as Chip Stocks Rally Ahead of Big Tech Earnings Reports.
This article is for informational purposes only and does not constitute financial advice.
