Investing in gaming stocks

The evolving gaming industry

People have been playing video games for decades. One of the first video games to see commercial success was Pong, released by Atari in 1972. The game was a two-dimensional arcade-tennis table game, which later turned into a home console game. Many cite Pong as the game that helped kickstart the industry.

The gaming industry has changed immensely since then. Today, three-dimensional high-definition graphics look nearly real, a once-niche market has turned mainstream with 3.7 billion gamers globally and game development costs have skyrocketed. Some games can cost tens to hundreds of millions to make. Advancements in technology have also changed the way people play games. While arcade games are still around, the main ways to play games are on mobile devices, consoles and PCs.

There are always new trends in the gaming industry. Some that have emerged over the years are esports, cloud-based gaming, social gaming, virtual reality (VR) gaming and ‘roguelike’ gaming, which is a subgenre of role-playing video games.

What are gaming stocks?

Gaming stocks refer to shares of companies that are primarily involved in the gaming industry. These companies can include video game developers, publishers, hardware manufacturers or even platforms that provide gaming services. Investing in gaming stocks allows individuals to participate in the growth and profitability of the gaming industry and potentially benefit from its success.

Segments of the online gaming ecosystem

The gaming industry is massive and diverse, creating different streams of revenue for the industry and investment opportunities. Below are eight segments within the gaming industry and examples of companies that operate in each. Some companies may be involved in multiple segments. For example, a company may both develop and publish games.

• Hardware developers build the infrastructure needed to play games on, such as consoles, mobile devices, PCs, graphic cards, keyboards, headphones and more.

  Examples: Nintendo (JP3756600007), NVIDIA (US67066G1040)

• Software developers develop applications to enable the game to work as intended, such as anti-cheat systems and communication software.

  Examples:Discord (privately held), OpenAI (privately held)

• Game developers build games from the ground up, including everything from coming up with the story to writing code and implementing it.

  Examples: Blizzard Entertainment (owned by Activision Blizzard US00507V1098), CD Projekt (PLOPTTC00011)

• Publishers provide financing for games and put a finished game on the market.

  Examples: Ubisoft (FR0000054470), Electronic Arts (US2855121099)

• Distributors/retailers sell and distribute games.

  Examples: GameStop (US36467W1099), Google Play (owned by Alphabet US02079K3059/US02079K1079)

• Esports companies are involved in organised competitive multiplayer video game competitions, usually played by professionals.

  Examples: Guild Esports (GB00BMWVF760), Enthusiast Gaming (CA29385B1094)

• Gaming arenas own indoor arenas and event centres that host gaming events.

  Examples: Allied Esports Entertainment (US0191701095)

• Streaming services provide services that allow users to livestream games.

  Examples: Twitch (owned by Amazon US0231351067), YouTube Gaming (owned by Alphabet US02079K3059/US02079K1079)

Top-10 companies by revenue

Newzoo, a research firm focusing on games and esports analytics, published their 2023 Global Games Market Report. In it, Newzoo reported the top 100 public game companies based on revenues in 2023. Out of these, the top-10 were either Asian or American companies:

*In cases where a company does not explicitly report game revenues apart from total revenues, Newzoo included an estimate. Esports were not included as well as revenues from hardware sales and other non-game sales.

Examples of gaming stocks

Gaming stocks have become increasingly popular investments as the gaming industry continues to grow at a rapid pace. Here are some examples of gaming stocks that you may consider:

1. Activision Blizzard (ATVI): Activision Blizzard is one of the largest and most well-known gaming companies in the world. It is responsible for popular franchises such as Call of Duty, World of Warcraft and Overwatch. The company has a strong track record of success and consistently releases highly anticipated games. Activision Blizzard also has a dedicated fan base, which contributes to their ongoing success.
2. Electronic Arts (EA): Also known as EA, it’s another major player in the gaming industry. It is behind popular franchises such as FIFA, Madden NFL and The Sims. EA has a strong portfolio of games across various genres and platforms, making them a reliable investment choice. The company has also been expanding into the mobile gaming market, further diversifying their revenue streams.
3. Nintendo (NTDOY): Known for iconic characters like Mario and Zelda, Nintendo has a dedicated fan base that spans generations. With the success of the Nintendo Switch console and a pipeline of highly anticipated games, Nintendo is a significant contender in this market.
4. NVIDIA (NVDA): While not a traditional gaming company, NVIDIA is a key player in the gaming industry due to its graphics processing units (GPUs). Nvidia's GPUs are widely used in gaming consoles and PCs, providing high-quality graphics and immersive gaming experiences. As the demand for advanced graphics continues to rise, Nvidia is well-positioned to benefit from the growth of the gaming industry.
5. Sony Interactive Entertainment (SNE): This is the division of Sony Corporation responsible for the PlayStation console and its accompanying games. With the release of the PlayStation 5, Sony has solidified its position as a leader in the gaming industry. Its strong lineup of exclusive titles and commitment to immersive gameplay experiences can make them an attractive investment option.

Pros & cons of investing in gaming stocks

Like any other investment, there are both pros and cons to consider before investing in gaming stocks. Let's take a closer look at some of them:

Pros

• Rapid industry growth: The gaming industry has experienced significant growth in recent years, with a large and dedicated consumer base. Investing in gaming stocks can provide an opportunity to benefit from this growth.
• Innovation and technological advancements: Gaming companies are often at the forefront of technological advancements, including virtual reality, augmented reality and cloud gaming. Investing in gaming stocks can give exposure to these innovative technologies.
• Diversification: Gaming stocks can offer diversification to an investment portfolio, as they belong to a unique sector with its own market dynamics, separate from other industries.
• Global market reach: The gaming industry has a global presence, allowing investors to access markets and consumers worldwide.
• Potential for high returns: Some gaming stocks have experienced significant price appreciation in recent years, leading to potential high returns for investors.

Cons

• Market volatility: The gaming industry can be subject to market volatility, influenced by factors such as consumer preferences, technology trends and competition. This volatility can lead to fluctuating stock prices.
• Risk of competition: The gaming industry is highly competitive, with new players constantly entering the market. Established companies may face challenges from emerging rivals, impacting their market share and profitability.
• Regulatory risks: Gaming companies may face regulatory challenges and changes in regulations that can impact their operations and financial performance.
• Dependence on hit titles: The success of gaming companies often relies on the performance of their game titles. If a highly anticipated game fails to meet expectations, it can have a negative impact on the company's stock price.
• Market saturation: The gaming market may become saturated with a large number of competing products, making it harder for companies to stand out and achieve sustainable growth.

How to invest in gaming ETFs

Gaming ETFs allow you to gain exposure to multiple companies within the gaming sector, providing potential for diversification and growth. Here are some Gaming ETFs we offer on our platform:

Note: Some ETFs may not be available on our platform for your country (temporarily) due to regulatory reasons.