Meme Stocks vs Big Tech: Best Buys with Short Squeeze Potential

Meme stock mania is back, fueled by social media hype and online communities like Reddit and X. The phenomenon is causing investors to question whether these stocks are viable long-term investments or just fleeting trends.

The capital markets are once again feeling the effects of meme stock mania, with shares of consumer brands and retailers experiencing sudden price surges. This phenomenon, reminiscent of 2021, is driven by online communities and social media platforms such as Reddit and X, where retail investors engage in speculative trading.

Donut-maker Krispy Kreme, estate agent Opendoor, mortgage provider Rocket Companies, and retailer Kohl’s have seen their share prices balloon in recent weeks. American Eagle, the clothing maker, has also surged, with its shares up almost 20 percent month on month after unveiling a new campaign starring actress Sydney Sweeney. This surge in popularity mirrors the 2021 meme stock phenomenon, where retail investors drove up the prices of GameStop and AMC due to nostalgia and love for the brands, rather than their financial performance [1].

However, there is more to this recent mania than just nostalgia. The retail market is more engaged than ever, with the pandemic increasing the use of trading apps and the rise of social media "finfluencers" making any movement in a familiar brand spread rapidly online [1]. Additionally, speculative trading has climbed to new highs, with levels comparable to the peak of the dotcom boom and 2021 [1].

Despite the surge, not all companies are considered meme stocks. For instance, Citron Research has declared that Rocket Companies is not a meme stock, despite its shares rising 47% year-to-date. The research firm highlighted the company's potential in the $13 trillion mortgage sector, describing it as "building the Amazon/Carvana of mortgages" [2].

The Federal Reserve is also watching the situation closely, with concerns about potential market instability and the possibility of interest rate cuts if the market stumbles [1]. The ongoing interest in zero-day options, which have seen 2.1 million transactions in Q2 2025, may also be fueling the markets, but history suggests that confidence can evaporate quickly if the market declines [1].

Investors are left questioning whether these meme stocks represent viable long-term investments or just fleeting trends. While the surge in popularity can provide an opportunity for companies to raise capital or issue new equity, it also comes with risks. The market's treatment of these stocks as a game can lead to rapid price fluctuations, and companies must manage the optics carefully to avoid looking like they are taking advantage of investors [4].

In conclusion, meme stock mania is back, but the underlying factors driving the recent surge are different from those in 2021. While the phenomenon presents opportunities for companies and investors alike, it also poses risks that must be managed carefully.

References:
[1] https://www.ir-impact.com/2025/07/meme-stock-mania-is-back-but-something-different-is-driving-krispy-kreme-and-american-eagles-surge/
[2] https://www.investing.com/news/stock-market-news/citron-research-says-rocket-companies-isnt-a-meme-stock-93CH-4167669
[3] https://www.reddit.com/r/wallstreetbets/comments/1mecad6/reddit_q2_crushes_estimates_strong_q3_outlook/
[4] https://www.bloomberg.com/news/articles/ceo-s-guide-to-a-meme-stock-moment