Reddit Hot Discussion: The Second Wave of AI – Is Capital Moving from Computing Stocks to the Application Layer?
- Core View: Market capital is rotating from AI infrastructure stocks that have completed their main upward trend (e.g., Nvidia) to application-layer companies leveraging AI to improve profit margins (e.g., RDDT, SNOW, NOW, and SHOP). Among these, Reddit has become the most watched target due to its data moat.
- Key Elements:
- The investment targets widely discussed by the community are RDDT (data provider), SNOW (AI data products), NOW and SHOP (AI integration platforms), all considered to have strong fundamentals.
- Reddit bulls believe its data is used by all major LLMs (e.g., Anthropic, Perplexity). With 70% year-over-year revenue growth, a 90% gross margin, and a PEG ratio below 1, they view the valuation as undervalued.
- There is market divergence: Skeptics argue the data moat is overestimated, as new models are shifting towards fine-tuning SLMs, and Reddit has limited bargaining power with big tech companies.
- Other popular targets include META (AI-powered ad targeting improving monetization efficiency) and Palantir (84% year-over-year growth in government revenue, 133% in commercial revenue), seen as undervalued opportunities.
- Professional analysts point out that volatility in infrastructure stocks (e.g., Nvidia) has compressed post-earnings, while the implied volatility structure for application-layer targets (RDDT, SNOW, SHOP) leans towards two-sided uncertainty. They suggest holding the stocks directly rather than using options leverage.
Original Author: Select-Leading-4542
Original Translation: TechFlow
Recently, the Reddit US stock community r/stocks has been buzzing with discussion—as AI infrastructure stocks led by NVIDIA (NVDA) have completed their major upward trend, more and more investors are turning their attention to application-layer companies that are truly converting AI into profits, believing that a new round of sector rotation is quietly unfolding.
Frequently mentioned targets in this round of discussion include:
Original Post:
It seems clear that NVDA and all the AI infrastructure stocks have already had their massive run-up.
I'm starting to wonder if the money is finally rotating into companies that are actually using AI to improve their profit margins.
My main focuses right now are RDDT, SNOW, NOW, and SHOP.
RDDT is obviously centrally positioned as a data provider, and its fundamentals look really strong. SNOW's crazy post-earnings jump shows the market is very receptive to its new AI products. NOW and SHOP are both heavily integrating AI into their own platforms—purely from a chart perspective, both look like decent bounce patterns.
What other targets on your watchlist fit this logic? Any worth digging deeper into?
Representative Responses from the Comment Section:
DeathStar_81 (10 hours ago): RDDT is literally breaking out right now. The fundamentals are just too strong to ignore. 70% revenue growth, 90% profit margins, PEG ratio below 1.
Ambitious_Traffic530 (11 hours ago): Reddit has gone up a lot in the past few days. Is it still worth buying now or should I wait for a pullback?
tobybells: Reddit has been consolidating in the same range—dropped from 120-130, consolidated around 140-150, then rallied to 160-170. Buying anywhere in this range is fine. I'm long RDDT with 2000 shares at a cost basis of $170, so you'd be buying cheaper than me.
ShowerMotor (12 hours ago): Call me conservative, but I think the second wave is still semis, and the third wave is hyperscalers and the Mag7... boring stuff. I plan to move most of my position to the Nasdaq 100 next year and hold until whenever.
AloneStaff5051 (11 hours ago): For context: All LLM models are trained on Reddit data. Anthropic and Perplexity haven't paid, and there is clearly an ongoing lawsuit against them.
PotatoAjacent104937 (12 hours ago): If that's your logic, Palantir should be on your list. I hold Palantir, but I feel like the adoption of their government contracts is slowing down. Last quarter, government revenue was up 84% YoY, and commercial revenue was up 133% YoY.
Last year it felt like there were headlines about new Palantir contracts every day, but the numbers don't lie!
Zipski577: Defense/AI spending increases every year, and Palantir's share is growing year over year. I used to think the commercial side was the biggest opportunity and that it was severely overvalued, but after deep diving into government contracts and historical data and re-modeling, a price target above $200 looks very realistic.
Hoosier2016: META too. Their AI-assisted ad targeting is already very profitable.
🔴 Bull Case Summary: RDDT is the Strongest Thesis in This Rotation
Reddit (RDDT) generated the most intense discussion within the community. The bullish view centers on its data moat—almost all major LLMs have been trained using Reddit data, while companies like Anthropic and Perplexity haven't paid for it yet, and related lawsuits are progressing. Supporters believe:
- Revenue is up 70% YoY, gross margins are as high as 90%, the PEG ratio is near or below 1, and the valuation is still severely undervalued
- As LLMs penetrate into e-commerce scenarios, Reddit's value as a "trust layer for authentic human feedback" will continue to rise
- The stock is currently consolidating in the 140-170 range, with technical signals pointing to an upside breakout
Key Point of Contention: How Deep is Reddit's Data Moat?
Some investors hold reservations, arguing that: more data doesn't necessarily mean higher quality. Many new models have shifted to fine-tuning smaller language models (SLMs) on existing datasets. The reliability of Reddit's content itself is questionable, and its bargaining power against big tech companies is overestimated.
For example:
TyrannosPyros (8 hours ago): I've completely closed my position in RDDT because it's underperforming and preventing me from putting more money into AMD and TSMC. The data moat is severely exaggerated. Most new models are created by fine-tuning LLMs on existing datasets. Their ad revenue is decent, but I don't think they have much bargaining power against big tech.
Fireballsdude: I really don't understand why people think that just because LLMs have already crawled Reddit's existing dataset, a continuous supply of fresh data isn't important. LLMs won't just be enterprise-focused; they will also do e-commerce as another source of monetization for these massive investments.
🟢 Views on Other Popular Targets
- META: AI-assisted ad targeting is already significantly improving monetization efficiency. Some investors believe the market has over-punished it for the metaverse failure and high CapEx, presenting a current undervaluation opportunity.
- Palantir (PLTR): The latest earnings showed government revenue up 84% YoY and commercial revenue up 133% YoY. The numbers are strong, but some investors feel there's a disconnect with the news flow.
- Snowflake (SNOW): Surged over 30% in a single day post-earnings as its AI data products gained market approval, though some lamented "missing the boat."
- Semiconductors and Hyperscalers: Some old-school investors believe the second wave will still be semiconductors, with the third wave only hitting Mag7 stocks like Google and Apple, suggesting buying the Nasdaq 100 directly and holding long-term.
Professional Perspective: What Does the Options Market Think of This Rotation?
One user in the comments offered a more professional analysis from a volatility surface perspective: Infrastructure stocks (like NVIDIA, Dell) experienced volatility compression post-earnings, indicating market consensus on the direction of CapEx expansion.
In contrast, the uncertainty surrounding application-layer stocks (RDDT, SNOW, SHOP) is two-sided. Their implied volatility structure doesn't show the same upside skew as infrastructure stocks. Therefore, instead of using options to leverage a bet on the application layer, it's cleaner to buy these stocks directly.
This discussion reflects the core disagreement in the current market: The money from AI infrastructure has been made, so where is the next 10x opportunity?
Most participants lean towards the idea that the monetization logic for the application layer is gradually becoming clearer, but the catalysts haven't fully materialized yet. RDDT, with its unique data assets, has become the most watched target, while META and Palantir gain more fundamental support from their already-deployed AI monetization capabilities.
