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Reddit shares surge on news of OpenAI content deal

Reddit Inc. signage is seen on the New York Stock Exchange trading floor prior to Reddit's IPO launch, Thursday, March. 21, 2024.
Reddit Inc. signage is seen on the New York Stock Exchange trading floor prior to Reddit's IPO launch, Thursday, March. 21, 2024. Copyright Yuki Iwamura/AP
Copyright Yuki Iwamura/AP
By Eleanor Butler
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ChatGPT will be trained using Reddit content as competition for premium datasets heats up among AI firms.

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Reddit shares climbed as much as 15% in after-hours trading after the discussion platform confirmed it had struck a deal with start-up OpenAI.

The agreement will allow ChatGPT, OpenAI’s chatbot, to access content on Reddit’s website that can be used to create text from human prompts.

As part of the deal, Reddit will also be able to add more AI-powered features to its website.

"If you’re going to become best pals with someone in the artificial intelligence space, putting your arm around the daddy of them all – OpenAI – is certainly a way to get the market excited," said Russ Mould, investment director at AJ Bell.

"It’s important for Reddit to take big steps forward with AI as it needs to show it is capable of growing the user base and its earnings to earn a reputation of being a business with legs."

Investors hope that Reddit's ability to sell data for AI training will allow the company to expand its revenue stream outside of its advertising business.

This prospect helped to fuel demand for shares when Reddit launched its New York IPO in March.

In the twenty years since its conception, the social media platform has never turned an annual profit, recording a net loss of $91 million last year (€84 million).

As part of its strategy to become more profitable, Reddit recently struck a data-sharing deal with Alphabet, worth about $60 million (€55 million) per year.

OpenAI, on the other hand, has also entered into agreements with a number of publishers recently, including the Financial Times, Associated Press, Germany’s Axel Springer, France’s Le Monde and Spain’s Prisa Media.

These agreements will allow OpenAI to use media-created content to feed their products.

While some firms are keen to collaborate with AI firms, others are more hostile.

This week, music producer Sony sent letters to Google, Microsoft and OpenAI - among other companies - asking them if they had unlawfully used its songs to develop AI systems.

Sony said it had reason to believe this was the case and insisted that it was prepared to launch a legal challenge.

Due to the rapidly changing nature of the AI landscape, it is yet unclear in the US and the EU whether using data to train AI tools counts as copyright infringement.

One high profile case currently passing through the US court system was launched by the New York Times in December.

The paper claims that millions of articles, often behind paywalls, were used without permission to develop ChatGPT.

According to the New York Times, OpenAI owes them "billions of dollars" in damages.

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