Here are some things to keep in mind with both stocks in general and Gamestop in particular.
1. Warren Buffet said, "When most people are bold, be fearful. When most people are fearful, be bold." Stock prices follow the conventional wisdom about a company. You need to know when the conventional wisdom is wrong when investing. That will allow you to know when a stock is too low or too high. Very often with the game industry, the conventional wisdom is either wrong or at least exaggerated, which is the case for Gamestop.
2. This idea of an "inevitable all digital future" is a lie. The truth is that a portion of the market prefers digital and another portion prefers physical. It took time for the market to adjust to the proper ratios, but because of COVID, we probably saw what the actual final ratios were for digital : physical in 2020. Don't expect digital to keep growing significantly in the future. Furthermore, if you look at the big 3, it should be obvious that Microsoft is strongly pushing for the "all digital future", Nintendo is always going to have a lot of physical copies, and Sony is somewhere in between.
3. Gamestop has a variety of factors that are affecting its successes and failures. The most obvious one is the increase in digital purchases. They will likely have to close some stores sometime in the next few years, but they don't necessarily have to go out of business if they fix their other issues. Another issue is poor management. Lots of people complain about Gamestop's practices and this comes down to poor management. I am personally not a fan of investing in a company that is poorly managed. Another issue is that they are backing the wrong horse. Gamestop, from my experience, has always been more proactive in selling Sony/Microsoft products than it has selling Nintendo products. Right now Nintendo is the company that is the most toward pro-physical copies and their system is selling like crazy. And yet, what we read is that Gamestop is partnering with Microsoft who strongly favors the "all digital future". Gamestop is being stupid. They are partnering with the company that is most responsible for hurting their bottom line. They do not have a bright future because of this.
4. The uptick in stock price is due to new consoles being released. Gamestop sees a noticeable increase in revenue when new systems are released. They may see their stock price perform well for a while due to this. Eventually the other problems are going to catch up with them though.
The TL;DR version is that Gamestop has some underlying management issues which is causing them to fail as a company. Over the next few years you need to look at whether they fix some or all of these management issues. If they do, then Gamestop will be a company worth investing in. Otherwise I would advise investors to stay away.