Interest in meme stocks at yearly high, says JPMorgan. What's going on?

Retail investors' demand for meme stocks has returned to levels last seen a year ago, when the stock market was recovering from Donald Trump's increased duties, according to an analysis by JPMorgan. "Overweight positions in meme stocks have increased sharply," MarketWatch quoted the bank's strategist Arun Jain as saying in a note.

Meme stocks are securities of companies that go viral on social networks: on platforms like Reddit and X, the publication writes. As a rule, such players have weak financial indicators, and the market does not expect them to become profitable in the foreseeable future. Often meme securities are among the stocks with the highest proportion of short positions, MarketWatch notes.

Last week, quotes for former merino wool sneaker maker Allbirds soared more than 700%. The company sold its shoe business and said it would build a data center for AI. The next day, shares of social network Myseum jumped 150% after the company also announced a U-turn toward AI. Shares of car rental service Avis Budget surged more than 700%, reaching a high by the end of trading on April 21 before plummeting nearly 70% in less than two sessions. According to Barron's, the short-squeeze is to blame: large funds had to liquidate short positions at low liquidity.

Last week, interest in meme stocks was also highlighted by researchers at Vanda Research, which tracks the trades of private investors who self-manage their accounts. This group of buyers has already lost interest in events in the Middle East and has had a chance to think about what to do with the money from tax deductions after the filing season ends April 15, the analysts explained.

"We are starting to see the first signs of another summer of meme stocks," Reuters quoted Vanda global macro strategist Viraj Patel as saying. And we're not just talking about the abnormal movement of one particular security - Allbirds. He pointed to signals that retail investors are again aggressively buying up longtime favorites - from Tesla and Palantir Technologies to quantum computing company IonQ. "These are retail investors' favorites - meme stocks that capture the imagination of the private trader," Patel told Reuters.

Meme stocks became a market phenomenon in the early days of the covid pandemic, the agency recalls. At that time, more people stuck at home started trading securities to cope with boredom and anxiety. But few companies caught in that wave managed to sustain growth afterward, Reuters notes. Last summer, the rush for meme stocks hit securities such as Kohl's, Opendoor Technologies and Wendy's. All of them are now trading well below their highs.

"We will always see foam around the edges of the market, and too often it coincides with market rallies," B strategist B. Riley Wealth's Art Hogan. - "There's a group of investors who, unfortunately, always tend to chase the most speculative names in the market.

This article was AI-translated and verified by a human editor