Meme stock frenzy 2.0: The same formula, but a shorter "shelf life"

The meme stock frenzy, driven by social media discussions and retail buying, has once again swept through the financial markets, with its core logic remaining unchanged—speculative attacks on companies that are heavily shorted.

The U.S. stock market has once again been engulfed by the meme stock frenzy. In mid-July, a number of underperforming companies, including Opendoor Technologies, Kohl's Corp., and Krispy Kreme, saw their stock prices surge dramatically. This rally was not based on changes in the companies' fundamentals but rather because they became the focus of discussions among a few well-known figures on social media, attracting a large influx of retail investors.

This wave of trading is reminiscent of the surges in GameStop and AMC Entertainment in 2021, targeting the same vulnerable companies that were packaged by internet celebrities as "challenging Wall Street professionals." For instance, Opendoor's stock price soared 43% on July 21, with a trading volume of 1.9 billion shares that day, accounting for nearly 10% of the total trading volume in the U.S. stock market. The activity in the options market even exceeded the single-day peak during the 2021 GameStop frenzy.

This meme-driven surge in stock prices may bring unexpected fortunes worth billions to a few, but for investors who buy in at high prices, it means a significant risk of loss. Since the trading logic is almost entirely detached from the company's business performance and outlook, the risks of participating in meme stock trading are extremely high.

Old Script Replayed: Common Characteristics of Meme Stocks

The repeated emergence of the meme stock frenzy stems from the fact that the target stocks share some common characteristics. First, they can ignite the imagination of internet communities and are promoted through opinion leaders on social media. These promotions are often accompanied by images and videos that incorporate elements of popular culture, known as "memes."

Second, buying these stocks is seen as a status symbol or a way to join a specific community, with investors encouraging each other to buy within the community. Whether it was the protagonists GameStop and AMC in 2021 or the current Opendoor, Krispy Kreme, and Beyond Meat Inc., most are well-known consumer brands.

Additionally, these companies often have two key characteristics: First, they are heavily shorted by professional investors, meaning there are significant short positions; second, their stock prices are relatively low, providing retail investors with a lower barrier to entry. When a short squeeze occurs, short sellers are forced to buy back shares to cover their losses, further driving irrational price increases.

A Different Era: How is the 2025 Frenzy Different?

Although the script is similar, the market environment in 2025 is drastically different from four years ago. In 2021, investors were at home due to the pandemic and held stimulus checks issued by the U.S. government, exchanging investment insights on social platforms. In contrast, the current market is facing pressures from high interest rates and uncertainties in trade policies, making the resurgence of speculative corners particularly prominent According to media reports, the number of stocks involved in this round of Meme stock frenzy is fewer than in 2021, but the price increases are more unstable and often short-lived. For example, the stock price of donut maker Krispy Kreme soared 39% at the opening on July 23, but closed up only 4.6%, with the gains significantly narrowing.

This transient characteristic is partly due to Wall Street institutional traders having established a set of strategies to quickly identify and respond to Meme-driven market movements, which often leads to a rapid loss of momentum.

Influencers and Regulation: The Drivers and Controversies Behind the Frenzy

Behind every frenzy, one can almost trace it back to posts on social platforms such as Discord, Reddit's WallStreetBets, or trading chat rooms like StockTwits. In 2021, it was investor Keith Gill (online name Roaring Kitty) whose bullish posts ignited the GameStop rally.

In the event of July 2025, Eric Jackson, founder of Toronto hedge fund EMJ Capital, posted a series of messages on social platform X encouraging buying, which made Opendoor the focus of retail investors' discussions and quickly propelled it to the top of StockTwits' most active trading list.

The legality of such actions is highly controversial. The U.S. Securities and Exchange Commission (SEC) is responsible for regulating market manipulation, but must prove manipulative intent. If someone promotes a stock to drive up its price and profit from it, it may constitute illegal activity.

Critics argue that promoters of Meme stocks often do not disclose key information such as their position size, trading times, and whether they receive promotional fees. However, others argue that this is no different from activist investors pushing for change or short-selling institutions releasing reports for profit.

Why is the Frenzy Hard to Sustain?

The frenzy surrounding Meme stocks is often difficult to sustain because it requires a continuous influx of new investors to maintain upward momentum. In 2021, pandemic restrictions and market conditions contributed to this requirement.

However, recent cases show that the duration of the frenzy is becoming shorter. In May 2021, AMC's stock price increase lasted only two days before reversing; in 2024, Faraday Future Intelligent Electric Inc.'s stock price soared from about $0.04 to nearly $4 within a week, but fell back to penny stock status in less than two weeks.

Ultimately, as demonstrated by AMC and GameStop in 2021, the core driving force behind the rise of Meme stocks is the collective sentiment of retail investors challenging the Wall Street establishment, but the fundamental business performance of companies will eventually play a decisive role, signaling the end of this carnival