Needham's bullish on Reddit's AI citation share
Wall Street has grown increasingly bullish on Reddit's (RDDT) stock this year, with analysts citing the the platform's increased user engagement, AI-driven ad monetization and new product integrations that have improved its profit trajectory.
However, in a note on Monday, Needham analysts, led by Laura Martin, focused on another aspect of Reddit's business that the firm sees driving future value: its dominant position as a core input to large language models (LLMs).
This "AI citation dominance" is "seen as a sustainable competitive advantage" for Reddit, according to Martin.
She pointed to recent studies conducted by Semrush and Axios that confirmed this dominance, with the former showing that among 230K prompts and 100K citations made between July and October 2025, Reddit was cited in approximately 40% of AI-generated responses. These citations happened across ChatGPT, Perplexity and Google's AI answers.
"This implies that RDDT is a key source of information for large language models (LLMs), and that it is becoming a home page for the Open Internet for consumers," Martin said.
She added that "citations are the new value driver for consumer discovery and navigation of the Open Internet."
The Semrush study found that Reddit far outpaced its next closest rivals within the citation ecosystem, with Wikipedia (26.3%) and YouTube (23.5%) finishing second and third respectively.
Martin also cited a study conducted by Pew Research that "found a meaningful gap in click behavior" when a Google search comes with AI-generated answers versus without.
"AI-Answers reduce clicks, so owning citation share (where Reddit over-indexes) becomes economically advantaged.
Martin maintained a Buy rating on Reddit shares and reiterated a $300 price target.
LLMs are diversifying away from Reddit
Although Needham sees this AI citation dominance as a significant source of strength for Reddit's value, it remains to be seen how long this dominant position lasts.
Despite the company forging a partnership with OpenAI last year (OpenAI CEO Sam Altman is a Reddit shareholder) and expanding its partnership with Google in 2024 as well, there is an indication that LLMs and AI-Answers (like those produced by Google) are looking to move away from their reliance on Reddit as a source of information.
In a post on LinkedIn last month, Leigh McKenzie, who leads SEO, AI Search and Online Visibility at Semrush, noted a "sharp reduction" in citations by ChatGPT to both Reddit and Wikipedia as part of its study.
Some industry experts assumed the reduction might be due to Google's removal of the num=100 parameter, which data vendors use to scrape the top 100 search results, including many Reddit threads.
But McKenzie said that the "reduction was too deep and too fast to be explained by a single search parameter," noting that only about a third of Reddit's rankings would've been affected by num=100.
“A more accurate interpretation is that ChatGPT rebalanced its citation model,” McKenzie said. "It reduced dependency on a handful of dominant domains and redistributed its trust signals across a broader range of sources.“
“In other words, what looked like volatility was actually recalibration," he added.
McKenzie said that this move by ChatGPT is part of a broader shift LLMs are making to create "stronger resistance to bias, less susceptibility to manipulation, and more diverse learning inputs."
Meanwhile, Yuli Saenz, growth marketing lead for APAC at Kudosity, pointed to the fact that OpenAI is "shifting towards more curated and directly licensed datasets rather than user-generated content from Reddit."
"This is driven by regulatory pressure, lawsuits from publishers, and the need for higher content quality and trust," Saenz said.