Reddit’s S&P 500 inclusion creates an unusually large forced-buying event. What's next for the stock?

By AltIndex Research · 14 min read · August 15, 9:23 am

Reddit will enter the S&P 500 before trading opens on August 18. J.P. Morgan estimates index funds may need to buy 16.7 million RDDT shares, nearly three times Reddit’s average daily trading volume since its IPO. The stock jumped sharply Friday on the news.

S&P Dow Jones Indices confirmed after Thursday's close that Reddit joins the S&P 500 before trading opens on Tuesday, August 18, taking the place of AvalonBay Communities. Reddit closed Friday at $178.09, up 12.63%.

Here is why an index addition moves a stock on its own. Every fund that tracks the S&P 500 has to hold every company in the index, in the right proportion. When a name is added, those funds are not deciding that Reddit is a good investment. They have to buy it, at whatever price the market asks, before the change takes effect.

J.P. Morgan sizes that at 16.7 million RDDT shares. Reddit has averaged about 5.98 million shares a day since its March 2024 IPO. That is 2.8 times a normal day's volume, roughly $2.97 billion of buying, and index funds do not spread it out. They track the benchmark, so most of it lands in one go at Monday's close.

Short interest tightens it further. 19.21 million shares are sold short, 13.24% of the float and close to four days of average volume, which means part of Friday's move was shorts buying to cover rather than anyone deciding Reddit is cheap.

All of that demand is mechanical, and all of it is finished by Tuesday morning. The useful question for anyone holding RDDT, or thinking about buying it, is what the stock is standing on once the forced buyers are done.

The Pop Only Undid the Earnings Drop

Reddit closed at $178.04 on July 30, the day it reported second quarter results. The next session it closed at $140.67, a 21% drop, after management said unpredictable search referrals were hurting US user growth. Friday's close was $178.09.

The index news bought back the earnings selloff and five cents more. Reddit is still down 22% year to date and 34% below the $270.71 it closed at last September. This is a round trip, not a breakout.

History says the rest fades too. S&P Dow Jones data from 2010 to 2020 puts the average gain at 7.5% during announcement week, which is about where Reddit already sits. Stephens analyst Melissa Roberts finds additions tend to beat the index between announcement and inclusion, then trail it by roughly 2% over the next three months. Of twelve recent competitive additions, seven are underwater since joining. Workday popped 10% on its announcement, then fell 19% from the peak after actually joining.

What the Data Says Happens Next

The bear case on Reddit is that AI search kills it. Google answers the question on the results page, nobody clicks through, and the ad impressions never happen. That is the fear that took the stock down 34% from its high.

Our traffic data does not show it happening yet. Reddit drew 4.32 billion visits in July, up 8.4% from July 2025 and up 20.6% from two years ago. The monthly record was set in January at 4.39 billion, and every month since has come in within 5% of it. Growth is slowing. The floor is not falling out.

AltIndex Web Traffic Data · monthly visits to reddit.com, August 2024 to July 2026

Reddit is also hiring like it believes its own guidance. Open job postings averaged 108 in August against 76 in January, and LinkedIn headcount is up 19.8% year over year to 5,039. Companies bracing for an ad slowdown do not add 800 people and open 40% more roles than they did seven months ago.

AltIndex Job Postings and LinkedIn Headcount Data · August 2024 to August 2026

The people inside agree. Reddit's employee business outlook sits at 70%, up from 56% in January, a 14 point improvement recorded while the stock was falling. Meanwhile the financials kept delivering: eight straight EPS beats, second quarter revenue of $804.9 million up 61% year over year, net income of $253 million, and third quarter guidance of $860 million to $870 million. The multiple has been cut by roughly two thirds since January while all of that happened.

The Bear Case

Reddit's revenue is almost entirely advertising, and advertising depends on people arriving from search. Management could not tell analysts in July when referral traffic normalizes. If ad growth slows from 64% toward 30%, today's multiple stops looking like a bargain.

The other risk is the one this article opened with. Index inclusion is one wave of buying and then nothing. After Monday, the next buyer has to want Reddit at a price 13% above Thursday's close, with no fund mandated to help.

The Bottom Line

Monday's buying is mechanical and finite. History says stocks give part of that pop back over the following quarter, and Reddit has already banked the average announcement-week gain in one session. Chasing it here is paying for flow.

What is worth watching is underneath. Traffic to reddit.com is growing year over year while the market prices in a collapse, job postings are at post-IPO highs, headcount is up nearly 20%, and employee outlook has improved 14 points since January. Our RDDT stock forecast and price prediction page tracks how those signals line up against analyst targets once the index flow clears.

Sources: AltIndex web traffic data, AltIndex job postings data, AltIndex LinkedIn employee data, AltIndex employee business outlook data, AltIndex AI Score. Company financials from Reddit's quarterly filings. Index inclusion details from S&P Dow Jones Indices. Share-count estimate from J.P. Morgan, average daily volume from LSEG, short interest and analyst target as of August 14, 2026. Market data through August 14, 2026; 52-week range is closing-price based. Stock prices are historical and for informational purposes only. This article does not constitute investment advice.

Disclosure: This article is for informational purposes only and does not constitute investment advice. AltIndex aggregates publicly available alternative data signals. Past signal performance does not guarantee future results. Always do your own due diligence before making investment decisions.