2024 Meme Stock Surge Differs From 2021 Phenomenon With Lower Retail Participation, Institutional Preparedness, And Fundamentals Driving Volatility

The recent surge in meme stocks, including GameStop and AMC Entertainment, has drawn comparisons to the 2021 phenomenon driven by social media discussions. However, there are significant differences in 2024. While both stocks saw dramatic gains of 74% and 32% on Tuesday, they also experienced significant sell-offs throughout the day. Other familiar meme stocks from 2021 have also seen gains, but to a lesser extent. Retail investor participation in GameStop and AMC is currently lower than during the height of the 2021 frenzy, according to data from Vanda Research. Additionally, institutional investors appear better equipped to handle the situation this time around. Unlike in 2021 when hedge funds like Melvin Capital were caught off guard, these investors are now better prepared. The lack of a coherent narrative surrounding the meme stocks this time around may also contribute to the differences between 2021 and 2024. Recent volatility in meme stocks appears to be driven by material news and fundamentals, rather than solely by Reddit posts. Even though many meme stocks saw impressive returns over the past two days, they were not as extreme as those seen during the 2021 frenzy. The current surge in meme stocks seems to be more fundamentals-driven, with gains attributed to earnings and Bitcoin fundamentals. Overall, while there are some similarities to the 2021 event, the current meme stock surge is distinct in numerous ways.