As supply issues and scalping made purchasing the last console generation difficult for consumers, manufacturers have begun looking for alternatives. With rising costs around semiconductors for processing units, the pricing of consoles could become prohibitive for the average consumer. Thus, the significant expansion of 5G networks and cloud computing data centers has led to the formation of cloud gaming stocks.
While the concept of cloud gaming did not prove successful for Google’s Stadia platform, much of that failure can be attributed to a lack of product exposure. Instead, services with more exposure will allow users to stream high-end games directly, eliminating costly consoles or PCs. This will ultimately make the gaming industry available to more consumers, increasing revenue and profit potential. For investors, these stocks could provide an entry into the future of the gaming industry. As such, here are three stocks that could revolutionize the nature of gaming.
Microsoft (MSFT)
The current leader in cloud gaming offerings, Microsoft’s (NASDAQ:MSFT) Xbox Cloud service continues to mature in functionality every year. Furthermore, the company’s Xbox business unit saw revenue increase 61% in the wake of its Activision acquisition. Now, with its colossal library of games to choose from, Microsoft’s investments in cloud gaming infrastructure are paying off.
Moreover, Microsoft’s heavy investment in cloud computing infrastructure and cloud-based services means it’s ready to capitalize on the growing industry. This infrastructure, mainly in the form of Microsoft Azure, leverages powerful computing centers to provide gamers with high-fidelity graphics and performance. By expanding its customer base through cloud gaming services, Microsoft could ultimately come to dominate the gaming industry.
Investors looking for the next nexus in the gaming world should keep an eye on Microsoft’s cloud gaming ventures. That’s because, should it succeed and achieve widespread adoption, the days of costly console wars could become obsolete. This could put MSFT at the forefront of cloud gaming stocks.
Sony Group (SONY)
Known for its cinematic exclusives and robust technological specs, Sony Group’s (NYSE:SONY) Playstation product line has seen significant sales success. Outselling Microsoft’s Xbox platforms by 27.43 million units over the last 40 months, the PlayStation user base cannot be understated. However, Sony sees the potential for cloud gaming and has recently announced a game streaming service through its Playstation Plus service.
Considering Sony’s game division saw a $13 million increase in sales, the investment in cloud gaming makes sense. Sony knows the high cost of its consoles and hit-or-miss availability causes it to lose U.S. console gaming market share. As such, allowing users to play its games through a streaming service could eventually overtake PlayStation console sales for Sony.
With its already dominant global console sales, Sony’s position in the gaming industry lines it up perfectly for cloud gaming. Thus, investors should consider Sony among cloud gaming stocks as the industry grows.
Nvidia (NVDA)
No matter which gaming company prevails as the king of the cloud gaming stocks, Nvidia (NASDAQ:NVDA) cannot lose. As the preeminent designer of both personal computer graphics processing units (GPUs) and data center GPUs, Nvidia will always profit. Both the technology needed for streaming cloud games and hosting them is dominated by the company, with no real competitor in sight.
However, the company isn’t solely focusing on cloud hardware for revenue, as it competes in the cloud gaming sector as well. Nvidia’s primary cloud gaming venture, GeForce NOW, allows users to stream their owned PC games to secondary devices. The service also uses Nvidia’s powerful GTX and RTX GPUs to enable superior high-performance streaming.
This exceptionally cost-effective approach to gaming enables gamers to enjoy PC games without the exorbitant prices of a gaming rig. Of all the cloud gaming stocks, NVDA holds tremendous potential due to the sheer popularity of PC gaming when compared to consoles.
On the date of publication, Viktor Zarev did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
