Damian Troise, AP Business Writer
NEW YORK (AP) – Investors occasionally scooped up stocks in companies whose financial outlook appears to be dim. The consensus on such companies is that stocks should go down further. But they are suddenly promoted on an online forum and take off for no fundamental reason. Wall Street calls them “meme stocks.”
Meme stock features:
Poor growth outlook
Meme stock investors are usually looking for companies with poor finances that are unlikely to grow much over the next few years. This can be caused by a number of factors, such as outdated business models and intense competition.
Example: GameStop, the original meme stock, faced a changing gaming environment in which online games essentially replace the need for video game rental stores. Coles has been abused for years by the growth of online shopping and is now facing an increasingly competitive retail market, including traditional department stores like Macy’s and major retailers like Walmart.
Defeated the stock price
Meme stock is cheap. It is often part of the appeal for investors looking to make quick profits. At a low price, it’s easy to enter.
Example: Krispy Kreme, known for its light and airy doughnuts, landed on Wall Street in 2021 for over $19 per share. It sank below $3 last month. AMC Entertainment is a more extreme example. Before the 2021 memestock trend went over $300, it was a $11 stock. It currently trades for around $3 per share.
A big bet on price dropping further
The great interest from short sellers often precedes the transformation into stock memes.
Short sellers are essentially betting on stocks to make a profit. They do this by borrowing shares from brokers and selling those shares. When prices drop, they buy back stocks at low prices, put the stock back to the broker and pocket profits.
Some of Meme Stock’s IDs include investors suddenly buying very short stocks, which increases prices. This will cause short sellers to start buying stocks to cover losses known as “short apertures.” This will result in a higher stock price and create meme stock gatherings that will benefit investors who have purchased stocks at lower points.
Hype
Online buzz is usually a key source of powering meme stock and has not been changed to company basics. Hype usually comes from forums and platforms such as Reddit and YouTube.
Example: Entry into the Meme Status in GameStop started from the keyboard. Keith Gill, an investor known as the “Roaring Kitty,” brought together other investors to acquire thousands of GameStop stocks, changing the stock’s trajectory.
Volatility
Investing in meme stocks requires nerves. Profits can evaporate just as quickly as they come.
Example: Opendoor Technologies. Beatdown Online Real Estate Company shares were below $1 per share until early July, but now reaching $3.21, just as hedge fund manager Eric Jackson promoted the stock on X.
Original issue: July 30th, 2025, 1:30pm EDT
