Meme stocks explained: Hype, volatility, and lots of risk

Open full sized image

Be selective with your influencers.

© Hulahop, Design Shop/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

You’ve probably seen a meme or two—those bits of viral culture passed around online. But what happens when that same viral energy hits the stock market? That’s the idea behind meme stocks: companies whose share prices are being driven by Internet buzz rather than business fundamentals. Meme stock culture is a relatively new phenomenon, but one that’s created plenty of headlines—and heartburn—for active traders and everyday investors who get caught up in the frenzy.

Whether you’re excited or dismayed by the existence of meme stocks, if you participate in the stock market, you need to know what they are, which companies are (and have been) considered meme stocks, and what to do to navigate (or avoid) these volatile instruments.

A meme stock is any publicly traded stock with a price performance that’s strongly influenced by activity on social media. Both prices and trading volumes of meme stocks may be exceptionally volatile, as the hype on platforms like Reddit (RDDT) can cause spikes in demand. The price performance of meme stocks is generally not based on changes in the underlying company’s fundamentals or financial performance.

Here are five key characteristics of meme stocks:

Investing in meme stocks may feel like a way to get something out of social media, but before you proceed any further, make sure you know the risks. Buying meme stocks isn’t investing; it’s trading, and it closely resembles sports betting and other types of gambling from multiple angles. Trading meme stocks might get emotional for you in unexpected ways.

Here are some key risks to consider:

You’ll also want to make sure that your decision to buy a meme stock isn’t driven by FOMO (fear of missing out). That’s a type of emotional buying that may cause you to make decisions you’ll regret.

In true viral fashion, meme stocks rapidly became a thing in the early part of 2021. Here’s the timeline of key events in meme stock history.

In January 2021, Reddit users in the Wall Street Bets forum generated hype about GameStop (GME), a struggling video game retailer that was being heavily shorted by hedge funds. The buzz on Reddit caused a massive influx of individual investors, and the stock price of GameStop rose dramatically.

Within a couple weeks, social media users flocked to the Wall Street Bets forum to join the conversation and participate in the hype. Other stocks, like AMC Entertainment (AMC), Bed Bath & Beyond (BBBY), Blackberry (BB), and Nokia (NOK), became targets of rampant speculation—and their prices fluctuated accordingly. Some companies, like the movie theater chain AMC, embraced their meme stock status by leaning into it across social media platforms (see figure 1).

Open full sized image

Figure 1: GRAB SOME POPCORN—THIS IS WORTH WATCHING. Shares of movie theater group AMC Entertainment (AMC) were on the front end of the meme stock frenzy of 2021. The stock staged a couple of short “comebacks” along its way back down to a pre-pandemic level of a few dollars per share.

Source: StockCharts.com. Annotations by Encyclopædia Britannica, Inc. For educational purposes.

At the height of meme stock frenzy, Robinhood (HOOD)—the upstart brokerage that, a few years earlier, led the charge on zero-commission stock trading—and other major brokerages throttled trading of several major meme stocks. The financial institutions cited the need to meet financial requirements imposed by stock clearinghouses. Investors were outraged, sparking discussions about the fairness and transparency of the stock market.

In late January 2021, regulators began monitoring trading activity for meme stocks. Concerned about potential market manipulation and overall stability in the financial markets, the U.S. Securities and Exchange Commission (SEC) and other financial watchdogs started closely observing how meme stocks were being traded.

The following month, lawmakers began holding hearings about meme stock trading activity. The hearings explored the roles of various stakeholders in meme stock trading, why Dodd-Frank Act rules related to short-selling disclosures were not implemented, and the widely held perception that “Wall Street always wins.”

In October 2021, the SEC issued a “Staff Report on Equity and Options Market Structure Conditions in Early 2021.” The report summarized and provided context for the events of early 2021, and identified key aspects of meme trading that the SEC intended to study further.

In late 2021, Roundhill Investments launched the Roundhill Meme Stock ETF. With the ticker symbol MEME, the exchange-traded fund tracked the performance of stocks with elevated social media activity and high interest from short sellers. The ETF invested in GameStop, AMC, BlackBerry, and Digital World Acquisition Corporation (DWAC)—the special purpose acquisition company (SPAC) that would eventually acquire Trump Media & Technology Group (DJT), owner of the Truth Social platform—at its launch.

Less than two years later, after the initial meme stock craze had largely died down and in true meme stock fashion, Roundhill announced the closure of the Meme Stock ETF. According to media reports at the time, the reason for the closure was lack of interest from day traders and too little trading volume.

GameStop, AMC, and other first-wave meme stocks made a bit of a meme-driven comeback in 2024, jumping several hundred percent when a major meme stock promoter—Keith Gill, who operates under the handle “Roaring Kitty”—sent his first social media posts in three years.

Around that time, a new wave of meme stocks emerged, including Trump Media, artificial intelligence hardware maker Super Micro Computer (SMCI), and Reddit itself—the platform that hosts much of the meme stock discussion—following its initial public offering in March. As with earlier meme-stock episodes, trading interest in these names diminished quickly after the initial burst of activity.

Then, in 2025, a new wave of meme stocks was informally grouped under the acronym DORK, which refers to the ticker symbols of Krispy Kreme (DNUT), Opendoor Technologies (OPEN), Rocket Lab (RKLB), and Kohl’s (KSS). Although the companies are unrelated, their stock symbols were combined into a meme-friendly label based on shared trading behavior—namely, rapid price swings driven by social media attention, a high level of short-selling interest, and speculative options trading activity. Other stocks associated with similar trading patterns in 2025 included American Eagle Outfitters (AEO) and GoPro (GPRO).

Buying or selling a stock based on what you read on social media is risky. If your goal is to buy a house, save for retirement, or otherwise increase your financial security, you might consider a fundamentals-based investing strategy that isn’t guided by Reddit, TikTok, or any other media platform.

It’s fun to dream about finding an easy shortcut on the path to economic prosperity. There’s a slim chance you could get there with a winning lottery ticket, a rich uncle you didn’t know about, or a killer meme stock trade in which you happen to get in (and out!) at the right time.

Meme stocks can soar on speculation, social media buzz, or a sudden short squeeze—but those same forces can just as easily send prices crashing back to earth. For investors, it’s a high-risk game with unpredictable outcomes. A few may time it right. Most are just left holding the bag.