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Meme stock frenzy reignites

Key takeaways

  • So-called meme stocks are a group of stocks that receive heightened social media coverage among individual investors.
  • These stocks have come back into the spotlight recently.
  • Trading meme stocks presents some unique risks and challenges.

Meme stocks strike again. As markets are trading near record highs, the return of this trade has stolen some headlines lately with several meme stock prices surging and plunging.

Let’s dive into the latest in the land of meme stocks and why it might matter for you.

What is a meme stock?

It’s been more than 4 years since meme stocks emerged in the midst of the global pandemic. In case you haven’t stayed abreast of the meme stock craze, here’s a quick primer.

A meme stock is one whose trading activity is pumped up via social media—particularly on Reddit, X, and YouTube. The use of memes, which are tweaked images, videos, text, etc., is a central component of how the usually positive reviews of these stocks are copied and spread across the internet. The creators of these posts are largely individual investors.

For example, one of the most prominent meme stock promoters is known by his social media handle Roaring Kitty. He is largely attributed as being an originator of the meme stock trend from posts on Reddit and other social media platforms covering companies like GameStop (), AMC (), and some others. His Reddit posts in particular for GameStop, which is widely considered the first meme stock, began attracting a small following of investors in the summer of 2020.

Over time, they would end up going viral. By January 2021, when GameStop’s stock price surged and financial news companies began to extensively cover the nascent trend, meme stocks went from cult following to capturing headlines.

Meme stock price surge and retreat

How did the meme stock craze happen? As momentum accelerated among individual investors, and news outlets shined the spotlight on these stocks, hundreds of thousands of small trades by individual investors in the then heavily shorted meme stocks resulted in huge price spikes.

At the same time, this contributed to short squeezes (where short sellers cover their short positions by buying the stock back, effectively driving the price even higher), helping these previously beaten down stocks soar. In early January 2021, GameStop was trading near $5 per share. At its peak in June 2021, GameStop nearly reached $60 per share.

Of course, there was a counter reaction. And a counter reaction to that reaction. And so on, and so on. The result has been a collection of stocks featuring unusual trading activity and significant volatility.

Meme stocks rise from the ashes

In recent years, the meme stock trade hasn’t reached the fever pitch that it did back in the winter of 2021. All of these same stocks that surged in value in the wake of the initial meme stock craze have fallen quite substantially in price from their peaks. GameStop, for example, reached a multiyear low near $10 per share in April 2024. Some have even declared bankruptcy.

But the reemergence on May 12 of Roaring Kitty, who had been largely absent from social media and the public eye since 2021, appears to have revived this trade—to some extent.

A single X post about GameStop has generated tens of millions of views, as of mid-May, and the price action has been just as notable. On May 10, GameStop was trading below $18 before jumping near $50 by May 14. It has since dropped back toward $20, as of late-May.

Meme stock investing

So what does this all mean for you? Obviously, if you are invested in any meme stocks, you might expect heightened volatility—particularly when they are in the news, as they are now.

The type of stock that became a meme stock is also worth thinking about. Meme stocks are largely companies with brands that are recognizable to some degree to individual investors, compared with other stocks that may not have as much resonance with regular investors. They were also stocks that had seen better days.

If you own a stock with these types of characteristics, it doesn’t mean that they will become part of the meme stock trade. However, it could mean those investments share features of a certain kind of trend trading, creating the potential for them to get caught up in irregular trading activity.

Perhaps more importantly, it’s critical for you to have good reasons to invest in anything. Stick to making investment decisions that are right for your specific situation. Following the herd or any other impetus that is not grounded in a strong fundamental basis for investing your money is never prudent.

And while this iteration of the meme stock craze lasts, you may want to brace for more volatility among these stocks.

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The stocks mentioned are not necessarily holdings invested in by Fidelity. References to specific company stocks should not be construed as recommendations or investment advice. The statements and opinions are those of the speaker, do not necessarily represent the views of Fidelity as a whole, and are subject to change at any time, based on market or other conditions.

As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Past performance is no guarantee of future results.

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