Reddit Jumps 11% on S&P 500 Entry as Google AI Traffic Risk Looms

Reddit’s stock shot up 11% in extended trading Thursday. The trigger: confirmation that the platform is joining the S&P 500, a milestone that puts it alongside Meta as only the second pure-play social media company ever included in the index.

The S&P Dow Jones Indices said Reddit — ticker RDDT — will replace AvalonBay Communities before trading opens on August 18. AvalonBay’s exit follows Equity Residential’s acquisition of the real estate company. Reddit’s shares hit $175.38 in postmarket trading, up from a Thursday close of $153.12. That’s a clean 11% pop on the news, and it came fast.

Not a surprise, really. S&P inclusion basically forces index funds to buy your stock whether they like you or not.

What S&P Membership Actually Means for Reddit

When a company lands in the S&P 500, passive funds tracking the index have to hold it. No debate, no discretion. That creates automatic buying pressure, which is a big part of why the stock jumped before a single new investor made a conscious choice to own Reddit. The demand is structural, not sentiment-driven — at least in the short run.

And Reddit needs that kind of cushion right now. Less than three weeks before the index announcement, the company dropped its second quarter earnings. Revenue growth came in above 60% for the eighth consecutive quarter. Eight straight quarters. That’s a run most companies would kill for.

But the stock fell anyway.

CEO Steve Huffman said during the earnings call that search referrals had become unstable. He pointed directly at Google’s Gemini-powered AI Overviews — the feature that answers user questions right on the search results page, without sending anyone to an outside site. Reddit, like a lot of content platforms, has historically pulled a massive share of its traffic from Google. When Google starts answering questions itself, fewer people click through. That’s the problem in plain terms.

Huffman didn’t sugarcoat it. He called the volatility real and tied it specifically to the AI Overview rollout. Investors heard that and sold. The stock dropped on earnings day despite the revenue numbers.

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The Google Problem Isn’t Going Away

S&P 500 membership won’t fix the traffic issue. It’ll bring in a new class of investors who are required to hold the stock regardless of how they feel about the AI search debate, but the underlying risk doesn’t disappear because index funds now own shares. Reddit still needs people to visit Reddit.

That’s the tension sitting underneath the 11% pop. The index inclusion is real and the demand it creates is real. But so is the concern that Google’s AI push is quietly eating into the referral traffic that platforms like Reddit have relied on for years. It’s not a Reddit-specific problem — it’s basically an industry-wide reckoning — but Reddit is one of the more exposed players because of how central search has been to its growth model.

Huffman’s comments kind of laid that bare. Search referrals aren’t a nice-to-have for Reddit. They’ve been a core acquisition channel. When that channel gets disrupted by an AI layer sitting between the user and the content, the math gets murky fast.

So the next few months will probably matter a lot. The initial excitement from S&P inclusion tends to fade. Index funds buy in, the price adjusts, and then the stock trades on fundamentals again. At that point, Reddit’s ability to hold user numbers without leaning as hard on Google becomes the actual story.

Coinbase went through a version of this. The crypto exchange joined the S&P 500 in 2025, a moment that felt significant for digital-first companies broadly. Reddit’s entry follows that same pattern — another non-traditional platform earning a seat in an index that once felt like the exclusive domain of industrials and financial giants.

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The same announcement also included a separate reshuffle: Sun Communities will join the S&P MidCap 400, replacing Webster Financial. Webster’s exit follows Banco Santander’s acquisition of the company.

Reddit’s path from IPO to S&P 500 was faster than a lot of people expected. The company went public not long ago, and it’s already cleared the bar for inclusion. That’s a real achievement. But the AI traffic headwind is real too, and it’s the kind of structural shift that doesn’t resolve on a quarterly earnings cycle. Google isn’t pulling back AI Overviews. If anything, the feature is expanding.

Reddit hits the index on August 18. The stock closed Thursday at $153.12 before the news broke.