Remember the frenzy of 2021, when Roaring Kitty and the meme-stock mania sent shares of GameStop and AMC Entertainment soaring to astronomical heights? The world watched in awe as day traders on Reddit bought shares of these heavily shorted stocks and caused them to skyrocket. GameStop’s stock reached dizzying heights in just a few short weeks, only to be forgotten as investor attention shifted elsewhere. Fast forward to today, and it seems like history may be repeating itself as Roaring Kitty once again makes waves with his first posts on X in three years.
While the spotlight may be on GameStop and the volatile world of meme-stocks, let’s not forget about the broader gaming industry that has been quietly making waves of its own. The gaming industry receives little attention from Wall Street, though it is larger than you might expect. At nearly $185 billion in sales annually, the global games market dwarfs the roughly $34 billion global box office. Half of the US population plays games, including mobile, and nearly 3 billion people play games worldwide. The industry attracts the world’s largest companies, including Microsoft, Apple, Nvidia, Amazon, Meta, and Alphabet.
Legacy publishers, like Electronic Arts (EA), Nintendo, and Take Two Interactive, have seen their stocks flatline since peaking during the lockdown. However, there has been a slew of activity in the industry. Microsoft acquired Activision Blizzard for $75 billion, in a deal that faced significant regulatory scrutiny. Walt Disney recently announced a $1.5 billion investment in Epic Games, the studio behind Fortnite, and Netflix continues to lean into gaming as an effective way to reduce churn. After a few years of backpedaling post-pandemic, the future is starting to look brighter with an impressive slate of new games on the horizon.
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One of the most anticipated games is Take Two’s Grand Theft Auto 6. This wholly inappropriate game is actually one of the largest in the industry, with the fifth installment reaching 195 million units sold worldwide. Thanks to advancements in computing power from Nvidia, whose GPUs were first used in gaming before artificial intelligence, this edition is expected to be spectacular. Of course, the graphics and visuals will be stunning, but one of the biggest advancements from AI is how the non-playable characters will interact. Rather than the pre-programmed mindless thugs of version 5, these life-like characters will truly come to life, enabling personalized storytelling.
Like many industries, AI will be an impactful growth driver over the coming years. As games become more captivating and engaging, players will spend more time playing, which has a direct impact on monetization. Microsoft is using AI to moderate toxic speech in Call of Duty and create new levels in Candy Crush. AI will enable truly massive multiplayer games, with tens of thousands of players able to play simultaneously. With the ability to create endlessly expansive maps, the scale of gaming has never been larger. The advances in technology are inspiring developers to create new ways of gaming, driving forward the industry at an accelerating rate.
Looking to the future of gaming, experiences are likely to continue to become more immersive. Whether with devices like Meta’s Oculus or Apple’s Vision Pro, or the ability for connected devices to interact with our surroundings using augmented reality. For many, gaming is a way of socializing and connecting with friends, and it will become increasingly more so. Children who grew up in the era of Roblox will naturally embrace a digital-first presence that will extend beyond gaming, to applications like shopping, television, and even certain elements of working. People are already using powerful technology to collaborate in real time, whether it’s designing plans in Autodesk’s virtual cloud offering or teaching best practices to a group of surgeons. The technologies being developed for gaming will continue to have a broader impact on the world around us.
While GameStop has managed to rekindle the hype surrounding meme-stocks, its resurgence from obscurity over the past three years is emblematic of the gaming industry that has been recovering in the post-pandemic world. Now, the industry is at the forefront of new technologies on the horizon. With much of the world enjoying games, it will be exciting to see the capabilities artificial intelligence offers. As players’ imaginations are increasingly captivated by these new offerings, the fundamentals of these companies should improve with higher earnings over time.
As we watch Roaring Kitty’s latest moves, it’s worth remembering that while meme-stocks may capture headlines, the true excitement lies in the continued evolution and growth of the gaming industry itself. The future looks bright, and players, investors, and developers alike have much to look forward to.
For more content by Jake Bleicher, Portfolio Manager click here.
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