Dave Mazza, managing director and head of product at Roundhill Investments, recently provided a detailed examination of the changing nature of meme stocks between 2021 and 2025, highlighting especially the expanding role retail investors play in this segment of the market.
Mazza's insights, shared during an interview with the Schwab Network, underscore that meme stocks have transformed from symbols of a retail-driven battle against Wall Street into a broader category encompassing speculative investments across diverse sectors. Initially, meme stocks like GameStop Corp. (NYSE:GME) and AMC Entertainment Holdings Inc. (NYSE:AMC) typified this phenomenon due to their high levels of short interest and significant hedge fund ownership.
However, by 2025, these stocks have shifted toward more nascent areas, including nuclear power, clean energy, and cryptocurrencies, signaling diversification in what defines a meme stock. Despite this change, the influence of retail investors remains robust, evidenced by the resurgence of formerly meme-designated companies such as OpenDoor (NASDAQ:OPEN) and Krispy Kreme (NYSE:DNUT). OpenDoor's shares saw an impressive price increase of over 330% in the past year, while Krispy Kreme's shares declined by more than 54% during the same period, illustrating the volatility typical of meme stock behavior.
Notably, retail investors have increased their participation in U.S. equity markets substantially; once accounting for roughly 8-10% of trading volume pre-pandemic, their share has climbed to between 20-25% in 2025 and peaked as high as 35% on certain occasions. Mazza warns institutional investors against underestimating the sophistication and influence of this investor class, which now operates with greater knowledge and a diverse array of trading alternatives.
Looking forward, Mazza explains that the valuations assigned to hyper-growth stocks are supported by strong revenue and earnings expansion, though he stresses that caution remains warranted. He identifies emerging sectors, such as nuclear energy and quantum computing, as possible catalysts for the next iteration of meme stock movements anticipated in 2026.
Tesla’s Distinct Position Among Meme Stocks
When evaluating whether Tesla (NASDAQ:TSLA) fits the typical mold of a meme stock, Mazza emphasizes the automaker's forward-looking valuation, which hinges largely on its ambitions beyond traditional electric vehicle production. Notable among these are ventures into humanoid robotics and robotaxis, areas believed by Tesla's loyal retail and institutional investor base to herald transformative changes in technology and transportation.
Yale School of Management’s Senior Associate Dean Jeff Sonnenfeld has labeled Tesla as potentially the largest meme stock in history, highlighting skepticism about its substantial price-to-earnings ratio exceeding 200. Sonnenfeld criticizes the company’s governance, particularly the newly approved compensation package for CEO Elon Musk, deeming it risky and potentially detrimental to shareholder value.
The Culture and Risks of Meme Stocks
Meme stocks typically thrive on hype that is disconnected from traditional financial fundamentals. Their momentum is fueled by collective retail investor action via online communities, challenging the conventions of Wall Street investing. These stocks display heightened volatility, characterized by rapid price surges and declines driven by retail trading enthusiasm, viral social media momentum, and influential online endorsement.
The meme stock phenomenon gained widespread recognition in January 2021 with a coordinated purchase of GameStop shares by Reddit’s WallStreetBets community. This action caused a historic short squeeze propelling the stock more than 2,300% higher, showcasing the collective power of retail investors.
The year 2025 saw a resurgence of meme stock activity, including in companies such as Krispy Kreme, OpenDoor, Beyond Meat Inc. (NASDAQ:BYND), which experienced over a 75% drop, and Kohl’s Corp. (NYSE:KSS), which posted a 60% gain, further underscoring the volatility and unpredictability within this segment.
Despite their popularity, meme stocks are regarded cautiously by many market commentators. CNBC’s Jim Cramer has expressed skepticism, warning that these stocks constitute “short-term victories” with potential for significant downside, cautioning investors that reliance on them for financial stability is precarious. Similarly, billionaire investor Ray Dalio underscores the risk of chasing meme stock trends while neglecting fundamental valuation, emphasizing the potential for costly errors when market pricing is overlooked.
Market Performance Snapshot
Examining recent price activity, the Roundhill Meme Stock ETF (NYSE:MEME) experienced a 24.64% decline over the previous three months. Yet, the fund recorded a 3.93% gain on Tuesday, closing at $7.40, marking a partial rebound since resuming activity in October after a two-year hiatus.
This dynamic underlines the ongoing volatility characteristic of meme stock investments and the complexities facing both retail and institutional investors in navigating this evolving market environment.
Disclaimer: This article is based on current information and does not constitute investment advice. Investors should consider their own financial situations before making investment decisions.