Reddit (RDDT) Surges 7.8% on AI-Driven Optimism and Earnings Momentum – What’s Next?

Summary
• Reddit’s shares jumped 7.8% to $210.21, hitting an intraday high of $212.69 and a low of $196.57.
• The rally followed Alphabet’s Gemini 3 AI model announcement and renewed hopes for a December rate cut.
• Reddit’s ad revenue surged 74% YoY, with AI-powered features like Reddit Answers driving monetization.
• The stock trades 27.9% below its 52-week high but remains 17.7% above its year-start price.

Reddit’s dramatic intraday move reflects a confluence of macroeconomic optimism and sector-specific momentum. The stock’s surge aligns with broader tech sector gains, fueled by Alphabet’s AI advancements and shifting Fed expectations. With a dynamic PE of 107.42 and a 2.94% turnover rate, the rally underscores investor confidence in Reddit’s AI-driven growth narrative.

Alphabet’s Gemini 3 AI Model and Fed Rate Outlook Fuel Reddit’s Rally
Reddit’s 7.8% surge was catalyzed by Alphabet’s announcement of its upgraded Gemini 3 AI model, which reignited enthusiasm for AI-driven tech stocks. The broader Nasdaq and S&P 500 rallied 2.6% and 1.6%, respectively, as investors priced in a potential December rate cut following the New York Fed president’s comments. Reddit’s own earnings momentum—74% ad revenue growth and a 17.7% YTD total return—further justified the move. The stock’s volatility (63 moves >5% in a year) suggests the market views the news as significant but not transformative, with the rally building on prior optimism about AI monetization and user growth.

Internet Content & Information Sector Rally Led by Alphabet’s AI Momentum
The Internet Content & Information sector, led by Alphabet (GOOGL), surged 1.4% intraday, reflecting broad-based AI optimism. Reddit’s 7.8% gain outperformed the sector’s average, highlighting its role as a high-growth AI monetization play. While Alphabet’s 5% rally anchored the sector, Reddit’s ad revenue acceleration and AI-driven platform upgrades position it as a beneficiary of the broader AI narrative. The sector’s 34% cloud sales jump (Alibaba) and Meta’s AI model announcements underscore the competitive landscape, with Reddit’s 74% ad revenue growth signaling strong execution.

Options Playbook: Capitalizing on Reddit’s AI-Driven Volatility
• MACD: -5.74 (Signal: -5.66, Histogram: -0.08) suggests a short-term bullish trend.
• RSI: 53.72 indicates neutral momentum, avoiding overbought/oversold extremes.
• Bollinger Bands: Current price ($210.21) near the upper band ($215.65), signaling potential overextension.
• 200D MA: $165.55 (price above) supports a bullish bias.

Reddit’s technicals and options chain suggest a high-volatility, short-term bullish setup. Key levels to watch include the 200D MA ($165.55) and the upper Bollinger Band ($215.65). The stock’s 7.8% intraday move and 63% YoY ad revenue growth justify a tactical options approach. Two top options from the chain:

• RDDT20251205C210 (Call, $210 strike, 12/5 expiry):
- IV: 60.69% (moderate)
- Leverage Ratio: 22.88%
- Delta: 0.534 (moderate sensitivity)
- Theta: -0.7798 (high time decay)
- Gamma: 0.0179 (high sensitivity to price moves)
- Turnover: 604,436 (high liquidity)
- Payoff (5% upside): $5.25 per contract. This call offers a balance of leverage and liquidity, ideal for a continuation of the AI-driven rally.

• RDDT20251205P200 (Put, $200 strike, 12/5 expiry):
- IV: 63.11% (moderate)
- Leverage Ratio: 45.76%
- Delta: -0.297 (moderate downside protection)
- Theta: -0.1162 (low time decay)
- Gamma: 0.0150 (moderate sensitivity)
- Turnover: 91,857 (solid liquidity)
- Payoff (5% upside): $10.21 per contract. This put provides downside insurance while capitalizing on the stock’s volatility.

Action Insight: Aggressive bulls may consider RDDT20251205C210 into a test of the $212.69 intraday high. Conservative traders might pair RDDT20251205P200 with the call for a collar strategy, capping risk while retaining upside potential.

Backtest Reddit Stock Performance
Below is the interactive report of the event-study back-test you requested. It shows how Reddit (RDDT.N) behaved after every close-to-close daily jump of ≥8 % between 1 Jan 2022 and 24 Nov 2025.Key take-aways1. Sample size: 18 qualifying surges.2. Short-term pressure: The average share price fell ≈3–5 % in the first 1-5 trading days (statistically significant at the 5 % level), with a win rate below 40 %.3. Mean reversion: Losses narrowed by day 9 and turned mildly positive from day 10 onward; after two weeks the cumulative event return became +2 % (vs benchmark +7 %), but the abnormal return lost significance.4. Longer window: By day 30 the stock was up ≈11 % post-event, still lagging the benchmark (~17 %). Only 2 of the 30-day points reached statistical significance.5. Practical implication: An immediate momentum chase after an 8 % spike has historically under-performed; waiting at least a week mitigated downside, yet excess alpha remained elusive.Parameter choices & assumptions• Surge definition – we used daily close-to-close change ≥ 8 % as an intraday-surge proxy because true intraday high/low data were not available in the open-source feed. • Holding window – 30-calendar trading days (default) to visualise both short- and medium-term drift. • Benchmark – equal-period buy-and-hold of RDDT to compute abnormal returns. • Missing inputs – where the user did not specify, default settings of the Aime event-back-testing engine were applied.Feel free to explore the interactive table and charts in the module above, or let me know if you’d like to adjust any parameters (e.g., different surge thresholds, alternative benchmark, or risk filters).

Reddit’s AI Narrative Gains Momentum – Position for a Volatile December
Reddit’s 7.8% rally underscores its role as a high-growth AI monetization play, with ad revenue growth and platform upgrades justifying the move. The stock’s technicals and options activity suggest a continuation of the bullish trend, particularly if the $212.69 intraday high is retested. Investors should monitor the 200D MA ($165.55) as a critical support level and watch for follow-through volume. The sector leader, Alphabet (GOOGL), gained 1.4%, reinforcing the AI-driven narrative. Act now: Buy RDDT20251205C210 if $210.21 holds, or short RDDT20251205P200 for downside protection as the Fed’s rate outlook remains pivotal.