By Harshita Mary Varghese and Aditya Soni

(Reuters) -Shares of online ad sellers surged on Wednesday as strong earnings from Google-parent Alphabet, Reddit and Snap signaled solid spending from brands ahead of the crucial holiday shopping season.

The three companies were set to add more than $110 billion combined to their market capitalizations, if current gains hold. Shares of Alphabet rose 5.4%, while Reddit jumped 37% and Snapchat-parent Snap climbed 13.3%.

The results also augur well for other ad-reliant companies such as Facebook-parent Meta Platforms, Amazon.com and Pinterest, which gained 0.3% to 1.3%.

The concurrent strength in results appears to be an indication of strength in the U.S. economy, as well as a benefit from U.S. election spending,” said Gil Luria, head of technology research at D.A. Davidson.

“They bode well not only for this holiday season, but for other digital advertisers such as Meta and Pinterest.”

Alphabet, whose strong quarter was also powered by an AI-driven surge in its cloud business, said late on Tuesday that it benefited from election-related ads.

Ads-focused peers will likely see similar gains as U.S. political advertising spending is expected to jump by nearly a third in 2024 over the previous U.S. presidential election, with digital media accounting for about 28% of that, a report from Insider Intelligence from earlier this year projected.

AI BOOST

For Snap, the quarter showed that better-performing ad features were bringing back some marketers to its Snapchat app. The company has leaned on artificial intelligence to sharpen its targeting of ads to users.

Reddit, which turned its first quarterly profit, is also benefiting from AI content licensing deals and moves such as using machine learning for translating its content into other languages to tap new users.

“AI has been central in increasing the relevancy of content suggestion and promotions, enhancing the experience for users and also increasing the potential for platform operators to profit. This trend seems to be gathering pace,” said Dan Coatsworth, investment analyst at AJ Bell.

Nearly half of the 58 analysts covering Alphabet raised their price targets while most of the 17 covering Reddit also lifted their views, according to LSEG data.

Snap saw at least seven price target increases.

Alphabet trades at nearly 20 times its 12-month forward earnings estimates, compared with 30.8 times for Snap.

(Reporting by Aditya Soni and Harshita Mary Varghese in Bengaluru; Editing by Sriraj Kalluvila)