And other investors see that short interest piling into an otherwise healthy (hypothetical) stock and they buy in anticipation of a short squeeze. And when the stock pops due to good news, those shorts become rocket fuel for the stock going up.

No single action in the stock market happens in a vacuum, and longs will absolutely react to what the shorts are doing. And a high short interest is often viewed as a contrarian indicator that dumb short money has piled into the stock and that its actually due for a pop. You often see that at bottoms in the stock.