Meme stocks have come a long way since early 2021. What qualified as a meme stock back then doesn’t pass muster today. Although the companies in both groups are hugely popular and witnessed large price movements as a result, the original cast was mainly those that had large short positions that could be exploited by traders. GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) became the face of the meme stock frenzy because of it.
That no longer seems to be a requirement. Today, meme stocks look more like traditional momentum plays. They are companies that pick up a following in internet chatrooms or social media and take off from there. Few other requirements are necessary.
While a lack of interest in looking at fundamentals still appears to be a guiding force, some companies that are considered meme stocks today do possess good fundamentals. So don’t dismiss all meme stocks out of hand. The following three meme stocks are companies that shouldn’t be ignored.
Advanced Micro Devices (AMD)
Chipmaker Advanced Micro Devices (NASDAQ:AMD) is one of a handful of original meme stocks that still carries that mantle today. It exploded in popularity in 2020 and 2021 with the stock price tripling in value. What separated AMD stock from the likes of GameStop, AMC and Bed Bath & Beyond was it had the fundamentals to back up the interest. Traders and Redditors might not have cared all that much but the chipmaker’s business was exploding.
Revenue surged 45% in 2020 and then accelerated from there, growing an additional 68% in 2021 and 44% in 2022. That was a 52% compounded annual growth rate (CAGR). Earnings grew from 30 cents per share in 2019 to $2.57 per share in 2021. Though they dipped back to 84 cents in 2022, that still represents a three-year CAGR of 41%. Coupled with a nearly pristine balance sheet, AMD could walk the walk as well as talk the talk.
That’s not too much different today. The chipmaker is reaping the benefits from the explosion in artificial intelligence (AI). Its data center segment is expected to generate $3.5 billion in sales this year, up from previous estimates of $2 billion.
With its new, powerful MI300X AI chip on the market and a platform to enhance customer utilization AMD stock has the potential to resume its parabolic climb up the charts.
Palantir Technologies (PLTR)
Like AMD, big data firm Palantir Technologies (NASDAQ:PLTR) is an early-stage meme stock holdover. Yet it had only gone public just before the trading craze took over. PLTR stock’s IPO was in September, 2020 and there were a lot of short sellers betting it wouldn’t hold up. Shares went public at $10 a piece and quickly soared to $45 a share with meme stock backing. From there on, though, it was a long slide lower. It finished 2022 below $6.50 a stub, a painful 86% decline.
Let’s just say things are slightly different today. With the stock now trading north of $23, Palantir is up over 260% over the past year. Quite a remarkable comeback but there is still much more room to grow.
Palantir Technologies was called the “best pure-play” in AI and also like AMD, should get its quarter’s worth out of this ride. Where once it was firmly just a government agency numbers cruncher, the big data outfit now is firmly ensconced in the commercial market. Revenue from the U.S. enterprise segment is rapidly rising, shooting 70% higher to $131 million last quarter. It reported more than $1 billion in commercial revenue for the full year.
The company introduced a new AI platform that customers are flocking to. It makes PLTR stock a meme stock worth buying.
Super Micro Computer (SMCI)
Even with Super Micro Computer (NASDAQ:SMCI) stock down 7% in the past week, shares are still up 700% in the last 12 months. That’s a meme stock-worthy performance if there ever was one.
Just as AMD and Palantir are being swept up in the AI frenzy, SMCI stock is as well. The server, storage and switch hardware specialist is benefiting from the need of cloud service providers, telecoms and Fortune 500 companies for rack-scale servers to build their own AI-powered data centers. Because many of Supermicro’s solutions for data centers, workstations and edge computing are certified for Nvidia‘s (NASDAQ:NVDA) graphics processing units, the equipment maker rises in sympathy with the semiconductor stock.
Of course, because SMCI stock is a meme stock, the gains are amplified. Yet it is not completely unwarranted. As we saw with AMD, data center demand is soaring so the hardware needed for them will rise as well.
however, due to the supersonic inflation of Supermicro stock, any pullback in the share price should be welcomed by investors with a long investing horizon. It allows for buying in at a cheaper price which is always welcome.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
