Reddit (RDDT) Shares Plunge 6.54% as Major Firm Downgrades, Citing AI Threats and Monetization Struggles

Reddit Inc. (RDDT) shares fell 0.07% on Wednesday, reaching a new low since September 2025, with a peak decline of 6.54% during the session. The drop marked a sharp reversal from earlier gains, reflecting growing investor skepticism about the platform’s long-term growth trajectory.

A major investment firm revised its stance on Reddit, downgrading its stock rating and slashing the price target. The move highlighted concerns over the company’s reliance on user-generated content and advertising revenue, which are increasingly vulnerable to disruptions from AI-driven platforms. Analysts noted that Reddit’s business model struggles to adapt to rapid technological shifts, leaving it exposed to competitive threats.

One key risk identified is the rise of AI-integrated search engines, which could divert users from community-driven platforms like Reddit. A leading tech company’s advancements in AI-powered search are expected to redefine how users access information, potentially eroding Reddit’s core audience. This shift could reduce engagement metrics and advertising revenue, compounding existing monetization challenges.

User disruption remains a persistent issue, with internal platform changes and evolving moderation policies affecting retention. Reddit’s pivot toward ad-supported models has also sparked user dissatisfaction, creating a delicate balance between generating revenue and maintaining community trust. These operational hurdles exacerb the platform’s vulnerability to external shocks.

Broader market volatility amplified the stock’s decline, as investors grappled with sector-wide uncertainties. However, Reddit’s underperformance was primarily driven by its own strategic weaknesses. The stock’s poor showing contrasted with gains in AI-focused sectors, underscoring a shift in capital toward high-growth technology innovations.

To stabilize its position, Reddit must address structural challenges while accelerating AI integration to remain competitive. Without clear solutions to retain users and diversify revenue streams, the company risks prolonged underperformance in a rapidly evolving digital landscape.