Meme stocks were quite popular among retail investors during the COVID-19 pandemic. Typically, “meme stocks” gain popularity on social media platforms, such as Reddit (RDDT), resulting in a buying frenzy among retail investors and a strong uptick in share prices.
While it's possible to generate enviable returns in the near term, investing in meme stocks is quite risky, given that they are typically backed by investor sentiment and not by company fundamentals. For instance, one of the most popular meme stocks in 2021 was AMC Entertainment (AMC), whose share price surged more than 2,500% during the first half of 2021. Today, the stock trades at $3 - and that's after a 1-for-10 reverse split carried out last fall.
