Reddit, Inc (RDDT) shares gained 7.5% on Tuesday, riding a wave of optimism sparked by Meta Platforms Inc (META)'s potential partnership with Alphabet Inc (GOOGL) on artificial intelligence chips. Sometimes good news for the industry leader lifts everyone's boat—even if you're not directly involved in the deal.

Here's what's driving the excitement: Google is reportedly in talks with Meta and other cloud customers about supplying its tensor processing units (TPUs), aiming to challenge Nvidia Corp's (NVDA) dominance in the AI chip market. Meta could start renting TPUs from Google Cloud as early as 2026, with potential investments reaching billions of dollars by 2027 as the company looks to slash its AI training and inference costs.

For Reddit, this is pure positive sentiment spillover. The $37 billion platform has plenty of its own momentum—shares are up over 28% year-to-date after beating revenue and earnings estimates for four consecutive quarters. The company's growth story centers on advertising revenue, user expansion, and strategic moves in AI and international markets.

The Reality Check: Still Playing Catch-Up

But let's talk about where Reddit actually stands in the social media hierarchy. According to a fresh Pew Research poll, Alphabet and Meta continue their stranglehold on U.S. social media usage, leaving Reddit somewhere in the middle of the pack.

The numbers tell the story: YouTube dominates with 84% of Americans using it regularly, followed by Facebook at 71% and Instagram at 50%. Reddit? It ranks sixth with 26% usage, trailing TikTok and WhatsApp but staying ahead of X, Threads, and Truth Social.

There's growth happening—Reddit has climbed from 18% usage in 2021 to 26% today, with younger users leading the charge. That's real progress. But it also highlights just how far behind the platform remains compared to the industry giants.

Cathie Wood Takes Profits

Interestingly, Cathie Wood's Ark Invest recently trimmed its Reddit position, selling 39,854 shares worth approximately $7.5 million. This came even after the platform delivered impressive third-quarter results showing accelerated user growth, stronger ad revenue, and improved profitability.

Wood appears to be booking gains as the stock climbs, redirecting capital toward higher-conviction cryptocurrency-linked investments. It's a reminder that even strong performers can see institutional investors rotate out when valuations get rich.

Price Action: RDDT stock closed up 7.50% at $209.76 on Tuesday.