Meme stocks are making a comeback this summer. In 2021, stocks like GameStop (GME) and AMC (AMC) that no one cared about suddenly skyrocketed to all-time highs. This time, Opendoor (OPEN), Kohl’s (KSS), GoPro (GPRO) and Krispy Kreme (DNUT) have all jumped in price not because these companies are doing better, but due to a wave of online hype.
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While some people will make quick profits, many others could lose money just as fast. Before you jump into meme stocks, here are some red flags you should look out for.
Big Price Jumps Without Fundamentals
When a stock skyrockets by hundreds of percent in a few days, it’s easy to think you’re missing out on something big. But in many cases, the surge is driven by hype, not company fundamentals.
For example, in late July, Yahoo Finance reported that Opendoor stock rose by more than 300% over the previous month. As of Aug. 12, 2025, GoPro has soared by more than 56% over the past month.
When you see this pattern — stocks rising dramatically without any good news — it’s often a sign of speculative frenzy. When the excitement fades, those gains can disappear quickly. So don’t be the one jumping in late because you’ll likely lose money.
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Heavy Short Interest
When a stock is heavily shorted, investors are betting it will drop, and it can lead to increased volatility. If the stock’s price goes up instead, those investors will rush to buy it back to limit losses, which can drive the stock price even higher. This sudden surge is known as a short squeeze.
In late July, Forbes reported that nearly half (49%) of Kohl’s outstanding shares were short positions, while Opendoor had approximately 21% of its shares sold short.
These jumps can be so tempting, but the real danger is that once those shorts are covered and buyers lose interest, prices can fall just as explosively as they rose.
AI and Social Media Hype
In 2025, meme stocks aren’t just riding the waves from Reddit forums. Artificial intelligence (AI) is turbocharging them. “Meme stocks in 2025 rely on AI-driven sentiment analysis and real-time short-interest data, replacing viral tweets and impulsive buying,” according to AInvest.
AI-powered stock-tracking tools can scan social media, forums and news headlines for spikes in specific stock mentions or unusual trading activity. When a stock suddenly trends, these tools could alert thousands of traders. This can create a loop where the same stock names keep getting pushed online, potentially becoming meme stocks. That’s one reason meme stocks can see wild gains in a matter of days and then plummet quickly once the loop moves on to the next big thing.
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This article originally appeared on GOBankingRates.com: Meme Stocks Are Coming Back in 2025 — 3 Red Flags To Watch Out For
