What happened

Aterian (ATER 6.32%) is continuing to make huge gains after emerging as a new short-squeeze favorite among investors on Reddit's WallStreetBets discussion board and other online communities. The stock closed out the daily session up 28.6% and was up another 4% in after-hours trading as of 5:15 p.m. EDT.

The stock began spiking early this month as it emerged as a popular short-squeeze candidate, but the momentum appeared to dissipate as the e-commerce and consumer products company's share price plummeted roughly 39% on Sept. 14. Now, it looks like investors are once again pouring back into Aterian in hopes of powering the next big meme stock payday. 

Stacks of hundred-dollar bills.

Image source: Getty Images.

So what

Aterian's share price surged amid excitement surrounding its AI-powered e-commerce services initiatives and strong momentum for meme stocks at the beginning of the year. However, it's been prone to volatile trading in subsequent months and hasn't managed to hold gains for long. The company does have relatively high short interest, and its number of shares sold short has steadily marched higher over the last six months, but recent volatility without much in the way of business-specific news suggests the stock is still squarely in the high-risk, high-reward category. 

Now what

Some investors have scored huge wins this year by backing meme stocks including GameStop and AMC Entertainment as they went on to enjoy massive short-squeeze rallies, and it's possible that similar action will push Aterian's share price significantly above current levels. However, the mounting short interest also reflects concerns about the company's ability to shift into delivering consistent profits, and it's not clear if its AI bets are on track to live up to expectations. 

Aterian now has a market capitalization of roughly $641 million and is valued at approximately 2.7 times this year's expected sales.