Meme Stock Mania Fizzles as Big Tech Steals the Show

While the broader market celebrates record highs fueled by blockbuster earnings from tech giants, the recent flare-up in meme stock trading appears to be losing steam. According to a new analysis from Vanda Research, investors shouldn’t expect a reboot of the widespread retail-driven frenzy that defined the market drama of early 2021.

The data suggests the air has already come out of the tire. Marco Iachini, senior vice president of research at Vanda, points to a significant drop in trading activity for the stocks that were recently caught in the speculative fever. He notes that for most of these companies, the average daily turnover—the percentage of shares traded relative to those outstanding—has plummeted by 30% to 90% since their peak in mid-July.

So, what’s behind this rapid decline in enthusiasm?

One of the primary drivers is the very force propelling the S&P 500 and Nasdaq to new heights: Big Tech. With stellar earnings reports from titans like Meta and Microsoft, and with Amazon and Apple on deck, retail investors are redirecting their attention and capital towards more established names.

“Recent flow data tells a similar story,” Iachini explained. “Purchasing of Mag7+ stocks as a share of total inflows have rebounded and then stabilized, suggesting that while meme stock flows made headlines, they didn’t ignite the kind of broad-based retail frenzy we saw during the original GME [GameStop] episode in 2021.”

Another key factor is a predictable seasonal pattern. Iachini highlights that the overall appetite for retail buying tends to fade as the year progresses. Retail investors were instrumental in helping the market bounce back from its April lows, but their influence may be waning.

This shift has important implications for the market’s future direction. Vanda Research suggests that for the current rally to be sustained through the second half of the year, a different type of investor may need to take the lead.

“Since April, the rebound has largely been driven by retail and systematic flows,” Iachini stated. “For the rally to sustain further… institutional discretionary investors may need to play a larger role from here.”

While Vanda’s data indicates that optimism among these larger institutional players is “recovering, but still modest,” their participation could increase if upcoming economic data, including Friday’s jobs report, continues to show resilience.

In short, while the ghost of GameStop briefly reappeared, the market’s current narrative is being written by tech behemoths, not a retail rebellion. For now, the meme stock reboot has been canceled.