New York, New York – Meme stocks are once again making waves in the stock market, reminiscent of the frenzy seen in 2021. These stocks, driven by social media hype rather than traditional business metrics, experienced significant surges ahead of Tuesday’s trading session. Following GameStop’s remarkable 72% surge on Monday, other favorites among WallStreetBets, the Reddit forum that ignited the meme-stock craze three years ago, also saw impressive gains in pre-market trading on Tuesday. AMC Entertainment, a movie theater operator, saw its shares rise by 78%, while BlackBerry and GameStop saw gains of 26% and over 130%, respectively.
The resurgence of meme stocks coincides with the return of trader Keith Gill, known as “Roaring Kitty,” on social media platform X (formerly Twitter) after a three-year hiatus. Gill gained notoriety for his significant investment in GameStop shares in 2019, turning a $53,000 stake into a multi-million dollar holding due to the hype surrounding the stock.
Traders on WallStreetBets are once again touting meme stocks, urging others to invest in GameStop and other favorites using the acronym YOLO, meaning “you only live once.” SunPower Corp., a solar energy company, Plug Power, a hydrogen fuel cell systems maker, Virgin Galactic, Richard Branson’s spaceflight company, and Beyond Meat, a plant-based food manufacturer, were among the other stocks that experienced gains during the meme stock resurgence. The interest in SunPower and Plug Power may also be linked to President Joe Biden’s announcement of new tariffs on Chinese electric vehicles, solar cells, and other products.
The allure of meme stocks lies in the potential for quick profits and the opportunity to challenge professional traders on Wall Street. However, the CEO of the financial advisory firm deVere Group, Nigel Green, warned of the extreme speculative nature of these investments. While significant profits can be made, valuations are volatile and can swing dramatically in both directions.
Despite the potential for big gains, there are significant risks involved. Green highlighted the losses suffered by hedge funds and other traders who had bet against GameStop’s stock, resulting in over $1 billion in losses for those with short positions in the company. Short selling, the strategy employed by these investors, involves profiting from a decline in a stock’s price, making it a high-risk endeavor in volatile meme stock trading.