Here's why meme stocks are back.

It's like 2021 all over again — at least, in one bullishness-on-steroids corner of the stock market.

Several "meme stocks," or companies whose shares are buoyed by social media buzz rather than traditional business fundamentals like growth and profits, surged on Tuesday. It's the second consecutive day that such stocks have popped in the stock market, following GameStop's 72% surge on Monday.

Other favorites with WallStreetBets, the Reddit forum that spurred the meme-stock craze three years ago, jumped in pre-market trading on Tuesday. Among them are movie-theater operator AMC Entertainment, whose shares soared 31%, and BlackBerry, with a 12% gain. GameStop shares spiked 60%.

The resurgence of the meme stock phenomenon comes as trader Keith Gill, also known as "Roaring Kitty," resurfaced on X (formerly Twitter) after a three-year hiatus, posting a sketch Sunday night of a man leaning forward in a chair. Gill became the face of meme stock traders after he bought GameStop shares for $53,000 in 2019 and reportedly turned it into a multi-million stake due to the hype around the stock.

Once again, traders are posting about meme stocks on WallStreetBets, urging others to buy stakes in GameStop and additional meme favorites with the term YOLO, or "you only live once." Others posted screenshots of their gains from AMC, BlackBerry and additional stocks.

Other stocks that are getting a lift in the meme stock resurgence include:

SunPower Corp., a photovoltaic solar energy company, whose shares jumped 60% Tuesday
Plug Power, a company that makes hydrogen fuel cell systems, with a 19% gain
Virgin Galactic, Richard Branson's spaceflight company, up 22%

In the case of SunPower and Plug Power, the companies may also have drawn interest from traders due to President Joe Biden's announcement of new tariffs on Chinese EVs, solar cells and other products.

"Extremely speculative"

The appeal is simple: the opportunity to make a quick buck in a short period of time, with the bonus of sticking it to the professional traders on Wall Street who have shunned meme stocks.

"[W] e expect day traders will pile in not because they think the memes have any real value, but because they hope others will get FOMO (the Fear of Missing Out), jack the price up and then they can sell off and make a quick profit," noted Nigel Green, the CEO of the financial advisory firm deVere Group, in an email.

But there are very real risks, Green added.

"Of course, big, big money can be made by some," he said. "But let's very clear: This is extremely speculative, and valuations can be expected to be incredibly wild — in both directions."

The dynamic was on full display Tuesday, with shares of AMC, BlackBerry, GameStop and other stocks that rocketed up in early trade already losing much of those gains by the afternoon. ↳

Among the immediate casualties aren't retail investors, but rather hedge funds and other traders who had bet that GameStop's stock would decline. Such a strategy, called short selling, involves a trade that will make money if a stock declines — investors lose money if the shares rise.

On Monday, hedge funds with short positions in GameStop lost more than $1 billion, analytics firm S3 Partners told CBS MoneyWatch.

"Shorting [GameStop shares] again may soon rank as the worst risk-reward of any hedge fund trade over the past decade: best case, make a dollar; worst case, lose five," Andrew Beer, co-founder and managing member of Dynamic Beta investments, said in an email.

Some meme stocks have a high share of short interest, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, wrote in a blog post. For instance, about 65 million shares of GameStock are currently shorted, or about 24% of its available stock, he noted.

Such companies have tended to attract meme stock investors because of the potential to engineer a so-called "short squeeze." That can occur when a shorted stock gains in price, forcing short sellers to cover their positions by buying the stock, which in turns sends the share price higher.

The surge in GameStop's shares will "squeeze [short sellers] out of their positions with their buy-to-covers pushing [GameStop's] stock price even higher than the momentum and day traders could do on their own," Dusaniwsky wrote.

The renewed focus on meme stocks comes amid a broader melt-up in financial markets powered by strong corporate profits and robust economic growth. The S&P 500 is up 26% over the last 12 months, while the Dow Jones Industrial Average and tech-heavy Nasdaq have risen 18% and 33%, respectively.