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Are meme stocks still a thing?
Last week, markets got a dose of 2021, when Wendy’s stock surged more than 25% in a day and the WallStreetBets crowd rallied around a singe mantra: “We need to save Wendy’s.”
It was a blast from the past and a reminder that the retail cohort still has the power to squeeze stocks, but in a tighter post-COVID market and a new era of mega-IPOs and hot investment themes, the playbook looks a little different than it did in the GameStop era.
Meme stocks then and now
In 2021 the meme stock trade allowed retail investors to dump their government “stimmy” checks into beaten down names like GameStop and AMC Entertainment, seen as symbols of a bygone era longed for by millennial investors.
“Back then, retail enthusiasm was fueled by abundant liquidity, a wave of high-profile IPOs and powerful thematic narratives around clean energy, EVs and disruptive technology,” Vanda wrote.
The market now looks similar to—though not the same as—the earlier meme stock era.
Among the disruptive technologies that Vanda alludes to that are popular with retail investors are quantum computing, a somewhat far-flung tech play that could one day be a more disruptive force.
Similarly, in 2021, space-themed ETFs were seeing their first burst of popularity, which now seems like a prelude to the historic SpaceX IPO this month, which has already reshaped the market.
Retail investors are also responding to real-world events, such as geopolitical upheavals and conflicts. High gas prices sparked by the Iran war have prompted a spike in EV demand, which has driven traders into parts of the market offering exposure.
Finally, there’s chips, but retail moves aren’t an indiscriminate play on AI hardware. Specifically, memory is the new hot spot.
A memory-stock ETF that went live in April quickly became one of the most popular thematic funds since the pandemic, and retail traders are relentlessly pouring money into the stocks linked to the technology.
Noor Al, an active trader and WallStreetBets moderator, who has been watching the evolution of the forum since before the days of the GameStop squeeze, said that traders have learned a lot since then.
“They’re more informed: responding to news and filings quicker and with more critical thinking. WSB traders are sizing their bets more reasonably, and fewer (but still some) unhinged, all-in, degeneracy.”
The professional investing community seems to agree that retail strategy has fundamentally shifted since 2021, despite some hard-to-miss similarities between then and now
“Most traders now understand that these are momentum plays that are a shorter-term vehicle, they can try to run it up, sell into the strength knowing that these trades will eventually dry up and find a last buyer, and that is the way to play it,” said Ken Mahoney, CEO of Mahoney Asset Management.
Bret Kenwell, a US investment analyst at eToro, said that retail’s overall reaction to the Wendy’s short squeeze shows that the community has gained notable experience since the days when GameStop and AMC were the names in focus.
“Retail traders are still willing to swing the bat, but they are less likely to throw the whole portfolio at one pitch,” he told Business Insider. “The opportunity is still there, but today’s retail investor seems more aware that these trades require tighter risk management, smaller position sizes, and a clear exit plan.”
From SPACs to SpaceX
In 2021, the market was also in the throes of the SPAC boom, a wave of blank-check firms that took many money-losing companies public with mixed results five years later.
Vanda notes that the retail investors are now enamored with a new wave of stock offerings, much smaller in number but much bigger in terms of market-cap. The SpaceX IPO was a historic moment for retail traders in particular, as Elon Musk’s rocket and AI firm earmarked more shares than usual for individuals. The stock quickly became one of the most traded in the market among retail investors, trailing only the most popular tech stocks and ETFs, like Nvidia and QQQ.
The next mega-cap IPO test will be Athropic and OpenAI’s giant offerings expected later this year. It remains to be seen if the AI giants will court retail investors the way SpaceX did, but it’s highly likely that they’ll be just as eager to to buy the stock.
“Another strong IPO cycle is emerging, this time centered around AI and private market champions. And retail investors are once again searching for the next transformational tech story.”
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Samuel O’Brient is an experienced financial markets and business journalist who has written extensively on a wide range of topics involving economics, technology and public policy. At Business Insider, he covers important macro and micro economic stories, including takes from leading economists and hedge fund managers, breaking IPOs, corporate bankruptcies, meme stocks and short-selling. He also writes on other markets such as crypto, oil and real estate.He has interviewed many of the market’s most influential voices, ranging from top economists such as Mark Zandi and Richard Thalerto prominent investors including Danny Moses, Andrew Left, Anthony Scaramucci, Louis Navellier and Grant Cardone.Programs such as LiveNOW from Fox and Taking Stock have had Samuel on to discuss stock market developments. His reporting has been cited by The New York Times DealBook, Bloomberg Radio, Forbes, Entrepreneur and TheFutureParty.Samuel began at InvestorPlace, covering investing, retail trading and macro economic trends. Prior to joining Business Insider, he served as a technology markets reporter at TheStreet. He is a graduate of Sarah Lawrence College and Trinity College Dublin.Samuel’s work has appeared in publications such as TipRanks, EV and Observer. When he isn’t chasing down stories, he can often be found browsing book and record shops. To reach Samuel, email him at sobrient@insider.com or connect with him on LinkedIn. He is also on Signal as Samuel Clemens. Popular Articles: A Nobel economist has a warning for meme stock tradersThe business school dropout who kicked off the Beyond Meat rally wants you to know he’s not Roaring Kitty 2.0A top economist who thinks we’re on the brink of a recession says he’s eyeing these 3 warning signsTrump’s 401(k) executive order marks big changes for retirement savings — and possibly puts your money at riskWhy hedge fund icon Ray Dalio says you shouldn’t invest in real estate in this economyAI bullishness is soaring, but pros see a major opportunity brewing in an overlooked corner of the market
