Why is GME Stock Rising? Meme Stock Surge Explained

Retail investors’ attention has once again been drawn to GameStop and AMC Entertainment, evoking memories of “the meme stock frenzy” that engulfed Wall Street three years prior, as a result of social media posts made by “Roaring Kitty,” the main figure behind that surge.
What you should know about the current spike in meme stocks is as follows:

Roaring Kitty and Sketch

After a three-year hiatus, Keith Gill, famously known as “Roaring Kitty” among traders, returned to social media site X on Sunday with a series of cryptic remarks. Among them was a drawing of a man slumped over a chair, a common meme in the gaming community that signifies things are heating up.

Gill built a compelling case for GameStop in 2021 through his vibrant YouTube streams and Reddit articles, which contributed to the infusion of retail capital into the company.

In his appearance before Congress in 2021, Gill rejected the idea that he had promoted GameStop to unsuspecting investors via social media for financial gain.

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Gamestop Once More Leads

With a gain of almost 139% from Friday’s close to Tuesday afternoon, videogame retailer GameStop (GME.N) is poised to see its market value soar above $9 billion. Theater company AMC Entertainment (AMC.N), which opens in a new tab, has seen a stock price increase of almost 130% after a two-day surge. The shares that have been heavily shorted were about to have their highest two-day gains since January 2021. Both are still far lower than their peaks in 2021.

According to J.P. Morgan, these two equities were also the most actively traded by retail investors on Monday.

Other heavily shorted stocks were also pushed up by retail traders, with shares of solar power company SunPower Corp (SPWR.O), headphones manufacturer Koss Corp (KOSS.O), and storage container maker Tupperware Brands (TUP.N) jumping 24% to 83%.
J.P. Morgan statistics revealed that retail market order as a percentage of total market volume climbed from 14.1% on May 1 to 17.5% on May 13.

What is Meme Stock？

Some corporate shares have been “memed” by retail investors who have used social media financial advice and trading platforms to raise their value.

In 2021, it came to light as a result of COVID-19 lockdowns increasing savings, policy stimulus increasing personal income, and unprecedentedly low interest rates driving investors into the stock market.

Anyone with a smartphone could try their hand at stock trading thanks to the development of fee-free trading apps.

Hedge funds that had bet against or taken short positions on “meme” stocks were squeezed when thousands of Reddit users on cheap trading platforms like Robinhood worked together to push up their values.

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What are the Differences This Time?

The Federal Reserve’s strong efforts to rein in inflation have led to interest rates in the US reaching multi-decade highs. The increases in the S&P 500 (.SPX), which opens a new tab, are concentrated in the shares of a small number of megacap corporations.
The further commentary from “Roaring Kitty” is likewise eagerly anticipated by many fund managers.

Nearly two years after its introduction, Roundhill Investments announced last year that its exchange-traded fund tracking the performance of meme stocks will be closing. This decision effectively ended the popular pandemic-era investment.

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