Gaming Industry Consolidation
In a couple of years, the global gaming industry is going to look a lot different than it does today. Why is this? Because there is a strong movement of blockchain-based companies moving into the Web 3.0 space. Traditional gaming as we know it will likely move towards the Metaverse and become more of a four-dimensional experience. The industry was rocked earlier this year when tech giant Microsoft (NASDAQ:MSFT) made a $68.7 billion acquisition of Activision Blizzard, one of the more prominent game developers in the world. Then, there is the world of GameFi that is taking a larger part of the market than we first thought. Games like Axie Infinity and Defi Kingdoms are providing players with legitimate ways to make passive cryptocurrencies by providing liquidity to the market.
Last week, GameStop (NYSE:GME) announced a partnership with Immutable X to get into the world of NFTs. But it was rumors of a potential partnership with Microsoft that really sent the meme stock’s price flying again. Joining forces with Microsoft would add a serious legitimacy to GameStop’s ongoing digital transformation. With that being said, I’m still staying far away from GameStop, a stock I previously wrote about as being overvalued and entering into a crowded and very competitive industry. Here are two gaming stocks I would much rather own than GameStop.
Sea Limited (NYSE:SE)
I just cannot quit being enthusiastic about the Southeast Asian tech conglomerate, Sea Limited. First, it’s trading at a discount from last year due to the ongoing weakness in tech names. With rising interest rates, forward looking cash flows lose some value. Whatever, I don’t think that matters quite so much for Sea Limited. My main bullishness actually revolves around the reason the stock sold off last month: Tencent is selling some of its stake in the company. This was never an indictment of Sea Limited by Tencent, rather a re-allocation of its capital. Sea Limited is strong enough to stand on its own now without Tencent needing to hold its hand. This move actually gives Sea Limited’s board more control over the direction of the company, and I believe that direction is pointed directly at India. The world’s second largest population is seeing a rapid rise in mobile gaming, something Garena’s Free Fire is aiming for. Sea Limited already has experience in creating its games for lower-performance mobile phones, something that is prevalent in lower socioeconomic regions. If Sea Limited can capture a fraction of the market of India’s mobile gaming sector, we could see this company continue on its path to greatness in the coming years.
NVIDIA (NASDAQ:NVDA)
Gaming simply does not exist without the proper hardware in consoles and in computers. NVIDIA is leading the charge into the future with its state of the art GPU processors. I won’t bother you with the long technical explanation, but there is certainly a reason why NVIDIA has a median analyst price target of over $350 per share. This is a near 40% upside from current trading levels. NVIDIA had an incredible year in 2021, and many thought the stock would take a breather. It has, and it’s even pulled back alongside the NASDAQ so far this year. NVIDIA recently surpassed Meta Platforms (NASDAQ:FB) in market cap, and with the Metaverse and mobile gaming industries set to explode, NVIDIA is going to be the catalyst that brings them all together.
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