GameStop's Second Act: A Stroke of Luck & a Hoard of Cash

CoreWeave & NVIDIA: Right Place, Right Time

Every so often, a company strikes a strikes gold with a bout of extreme luck. CoreWeave (CRWV) is a fantastic example of a company that benefited from an extremely lucky circumstance and pounced on the opportunity. In its infancy, the company was known as Atlantic Crypto, a digital asset company that owned and operated data centers used for crypto mining. However, in 2018, crypto markets crashed and entered a debilitating bear market, forcing Atlantic Crypto to pivot, change its name to CoreWeave, and focus on AI data centers. Although it wasn’t clear at the time, the pivot to AI data centers would turn out to be the best thing that could possibly happen to the company. In fact, annual revenues have soared from $15 million in 2022 to $5 billion in 2025.

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In the early 2000s, NVIDIA (NVDA) was best-known for its general-purpose computing and gaming chips. However, by 2006, NVIDIA discovered its chips were perfect for training complex AI models, fully embracing the coming AI revolution in 2010.

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GameStop: Better Lucky than Good

Before 2020, GameStop (GME) was a dying, heavily shorted, brick-and-mortar video game retailer. However, GME shares experienced one of the most breathtaking runs of all time after a group of retail investors on Reddit’s r/wallstreetbets forum orchestrated a short squeeze that forced large hedge funds to drive up the stock price. Amid retail investor liquidity gained fueled by COVID-era stimulus checks, GME shares would explode from $0.64 to $121!

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Like most fundamentally-absent short squeezes, GME’s story would end with a major correction, with shares dropping as low as $10 by early 2021.

GameStop is a Cash Cow

Since GME shares came back to Earth, Wall Street has largely forgotten about the once high flyer. However, GameStop’s business has materially changed. Amid the hype, the company’s management has used stock spikes to raise hoards of cash. In fact, since 2021, GME has raised more than $5 billion in cash. Currently, GME’s balance sheet shows ~$9 billion in cash on hand.

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GameStop Will Use Its Cash to Diversify

With its pristine balance sheet, GME is afforded flexibility. GameStop CEO Ryan Cohen has signaled that the company will diversify its business and will make a “very big” acquisition soon. An acquisition would allow GME to expand away from its slow-growing retail business into higher-growth businesses.

Michael Burry is Buying GME Shares Again

Famed investor and the inspiration behind Hollywood’s hit movie “The Big Short”, Michael Burry, told his newsletter subscribers that he is buying GME shares. In 2021, Burry was one of the few prominent, non-retail investors to catch the euphoric price move. Back then, Burry bet on the company because it was a short-squeeze. That said, Burry now believes that cost-cutting, Ryan Cohen’s turnaround strategy, and its dirt-cheap valuation will lead to the next big move. With a price-to-book ratio of 2.07, GME is one of the cheapest stocks on Wall Street.

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Meanwhile, with a lofty short interest of 16% and 65 million GME shares held short, the stock may be setting the stage for another meteoric short squeeze.

Bottom Line

Although GameStop’s meme era is a thing of the past, the company has a pristine balance sheet and a hoard of cash. The company is no longer a meme play but is instead a value company with several catalysts.

Zacks Names #1 Semiconductor Stock

This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.

With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.

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This article originally published on Zacks Investment Research (zacks.com).

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