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GameStop and AMC drop in overnight trading after explosive rally

A GameStop store in New York.

Scott Mlyn | CNBC

GameStop and AMC Entertainment tumbled in overnight trading on Wednesday, set to give back some of the meteoric rally amid a retail buying frenzy.

Shares of the brick-and-mortar video game retailer dropped 18% in extending trading, following a 134% gain during regular hours. The movie theater chain plunged 33% in overnight trading, after shares soared 300% in extremely heavy trading.

The pair has been popular targets in the “Wallstreetbets” Reddit chat room where a wave of at-home traders focus on heavily shorted stocks, pushing share higher and squeezing out short-selling hedge funds.

The forum, which has more than three million members, briefly went private as the moderators said they were “unable to ensure Reddit’s content policy.”

GameStop has rallied more than 400% this week alone, pushing its January gains to a jaw-dropping 1,700%. AMC has also skyrocketed over 450% this week. On Wednesday, more than one billion shares changed name in AMC, marking its highest volume ever.

The heightened speculative behavior among retail investors is raising eyebrows on Wall Street and many grew concerned that it could be a sign of a bubble with the stock market at record highs.

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