We recently compiled a list of the 20 AI News Investors Should Not Miss. In this article, we are going to take a look at where Reddit Inc (NYSE:RDDT) stands against the other AI stocks you should not miss.
2024 has been a big year for AI breakthroughs, and the momentum shows no signs of slowing down anytime soon. Generative AI has arguably been the biggest trend, with McKinsey estimating that it could add the equivalent of $2.6 trillion to $4.4 trillion in value across industries annually, based on 63 use cases they analyzed. Back in 2022, when OpenAI launched its free web app, ChatGPT, few could have predicted the scale of the AI revolution that would follow. Major tech giants have since followed suit, revealing their own chatbot-based assistants, AI-enabled phones, and much more.
READ ALSO: 15 AI News Investors Should Not Miss and 20 Trending AI Stocks on Latest News and Ratings
As AI continues to revolutionize industries and push technological boundaries to new heights, today’s headlines reveal just how impactful these advancements can be. The question of the hour is, with all of these big AI breakthroughs, are regulators finally catching up with developers working on their next big AI projects? Yahoo Finance’s Catalysts features an interview with Credo AI Founder and CEO Navrina Singh, discussing the sustainability of the valuations and growth of AI companies, and the potential risks they may pose. Credo AI is an AI governance platform streaming responsible AI adoption and automating oversight.
According to Singh, even though AI developers may see governance as a “speed bump in innovation”, companies who start with emerging technologies such as artificial intelligence with the right guardrails in place will eventually end up being “long-term winners”. Regardless of how long it takes for governance to fully catch up, the AI frenzy continues to intensify. In recent news, the world’s largest asset management firm led under the leadership of Larry Fink launched a new AI-focused exchange traded fund on Tuesday, October 22.
Tony Kim, head of the fundamental equities technology group, believes that AI is a growing stack of opportunity. The ETF is going to hold a concentrated portfolio of around 30 to 40 stocks, with new winners to be added as they emerge. According to Kim, the whole concept of the portfolio is to embody the concept of time and stack. That said, even though the AI trade has lost some spark, the plans and spending for advanced AI, in hopes of achieving artificial general intelligence, or AGI, make the portfolio very relevant.
“Most of these companies in tech are all racing to get to AGI. We all have different views of AGI and when AGI will happen and what it will cost, but it will cost a lot more. Orders of magnitude more. And not only will it take that much more [money], it will take that much time”.
– Tony Kim
That said, many of the companies that may prove to be the winners in the AI revolution may not be on investors’ radars yet, or may not even have begun being publicly traded. Consider Daze, a creative AI-powered messaging application that hasn’t even launched yet but already shows the potential to challenge leading platforms once it hits the market. Prelaunch, the app’s waitlist is already overflowing with approximately 156,000 sign-ups (and counting).
The momentum of the Daze app is happening alongside broader technical advancements, such as the launch of “Swifts,” or stratospheric, which are AI-enabled robotic cameras that fly on weather balloons, by a New York-based startup called Near Space Labs. The technology aims to assess property risks and climate-related disasters, helping insurance companies pay out claims within days instead of weeks or months.
In other news, Jeff Bezos-backed Perplexity AI has begun fundraising talks looking to double its valuation to $8 billion or more, according to the Wall Street Journal. Perplexity AI is an AI-powered research and conversational search engine that answers queries using natural language predictive text. Recently, the search engine has been facing numerous lawsuits from the likes of Dow Jones and the New York Post, alleging that the company uses copyrighted content unlawfully. Publishers claim that such bypasses are depriving them of advertising and subscription revenue, and also undermining the work of journalists. Even though Perplexity AI has launched a revenue-sharing program with some publishers, many still continue to push back and seek legal protection for their content.
Methodology
For this article, we selected AI stocks by combing through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
People interacting with a travel website, searching for the perfect destination.
Reddit Inc (NYSE:RDDT)
Number of Hedge Fund Holders: 39
Reddit Inc (NYSE:RDDT) is an American social news aggregation, content rating, and forum social network. Artificial Intelligence is an important part of the company’s business, with the company enhancing its AI capabilities by acquiring Memorable AI. This was following a partnership announcement with OpenAI in May.
In an interview at the Wall Street Journal’s Tech Live 2024 event that happened October 21–23, 2024, Reddit CEO Steve Huffman asserted that the essence of artificial intelligence stems from human intelligence, which is in turn found on platforms such as Reddit. Platforms like Reddit are a birthplace for diverse and colloquial conversations that keep content constantly updated.
“The Reddit corpus is a significant part of the training of the major foundation models and that’s because there’s colloquial words about pretty much every topic constantly up to date.”
According to Huffman, there is a general lowering of the quality of content on the Internet since more and more of it is written by AI. This is where Reddit stands out as it’s the place where you can find human content that ends up being used to train AI.
Reddit is expected to report its third-quarter results on October 29. According to The Fly, several investment firms have raised the price target for Reddit Inc (NYSE:RDDT) including Roth MKM, B.Riley, and Jefferies. On October 23, Roth MKM raised its Reddit stock price target to $89 from $66, keeping a buy rating on the shares. The firm has highlighted Reddit’s existing contracts with Google and OpenAI for utilizing the platform data in training their models. Open AI is expected to contribute $40 million, while Google’s partnership generates $60 million in annual recurring revenue (ARR).
Overall RDDT ranks 13th on our list of the AI stocks you should not miss. While we acknowledge the potential of RDDT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RDDT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.