Dec 14 (Reuters) - Shares of AMC Entertainment (AMC.N) closed higher on Tuesday after a sharp decline this month helped short sellers gain more than $1 billion on their bearish bets against the stock. The theater chain"s shares closed up 5.4% at $24.50 after falling as much as 10.5% to a new seven-month low earlier in the session. Shares of video game retailer GameStop (GME.N), which have also tumbled in recent days, were up about 7.9% at $147.69. Both companies were at the heart of a meme stock phenomenon earlier this year, when individual investors coordinating on online message boards helped fuel stunning rallies that cost short sellers billions of dollars. More recently, those stocks have tumbled, with AMC down around 28% in the month-to-date and GameStop off nearly 25%. Short-sellers have gained $1.1 billion on their bets against AMC since the beginning of December, data from analytics firm Ortex showed on Tuesday morning, nearly halving their year-to-date losses. GameStop short-sellers have made $330 million since the start of the month but are still down a net $11.78 billion year to date, Ortex data showed. AMC and GameStop are up around 1,000% and 600% year-to-date, respectively. The estimated short interest at AMC increased to 19% of its free float from 16% at the end of November, per Ortex data. GameStop short interest has shot up to 14% from 11% in the same period. The losses in the two stocks come as some investors have grown more cautious over some comparatively risky assets amid worries over a new wave of COVID-19 and a more hawkish Federal Reserve. After several years of strong stock market returns, some investors are "getting a little worried about 2022 and thinking we"re not going to have as great a year," said Sam Stovall, chief investment strategist at CFRA Research. Retail favorites drop in December Retail favorites drop in December GameStop posted a bigger-than-expected quarterly loss last week, while top executives at AMC reported large stake sales, shaking some investors" faith in the stocks. Worries that the Omicron variant of the coronavirus could hit theater attendance may also be weighing on AMC"s stock, Stovall said. Investor interest in the options on the two stocks has also dropped. The one-month moving average of open options contracts on GameStop is down about 66% from a record high in March, according to Trade Alert data. Similarly, open contracts on AMC have shrunk about 40% from their late June high.