Why Reddit Stock Sank This Week

Key Points

• Reddit stock lost ground this week in conjunction with trends impacting the broader market.

• Recent comments from Federal Reserve Chair Jerome Powell raised concerns about valuations across the stock market.

• 10 stocks we like better than Reddit ›

Reddit (NYSE: RDDT) stock got hit with a pullback this week. The company's share price fell 9.2% in a stretch of trading that saw the S&P 500 fall 0.3% and the Nasdaq Composite decline 0.7%.

Reddit saw a substantial valuation retracement this week as investors moved out of growth-dependent stocks. Despite the sell-off, the company's share price is still up 47% across 2025's trading.

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Reddit stock sank this week as investors reduced risk exposure

Investors broadly moved out of growth-dependent stocks this week as valuation concerns and macroeconomic risk factors came into focus. While investors recently got a long-awaited interest rate cut from the Federal Reserve, there have also been some potential warning indicators.

Along those lines, Fed Chair Jerome Powell stated this week that stocks were "fairly highly valued." The comments, along with data showing persistent inflationary pressures, prompted investors to pivot to risk-off trading.

What's next for Reddit?

Since its initial public offering (IPO) in March 2024, Reddit has emerged as a promising artificial intelligence (AI) play. While the company is not at the forefront of most technologies that investors typically associate with the AI trend, it does have access to valuable troves of data.

Reddit has been licensing its data for the training of AI models, and this new source of revenue has transformed the company's growth trajectory. The company's social media platform is currently one of the leading destinations for the training of large language models. Whether the company continues to see sales growth hold strong at current levels or continue to accelerate remains to be seen, but the company's growth engine undeniably has some promising catalysts right now.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.