A Look at the Top Gaming Stocks for Long-Term Growth: AMD, Microsoft, and Intel
The video gaming industry has become a behemoth, encompassing a wide range of platforms and generating enormous revenue. Recent developments in gaming, such as microtransactions and subscription-based services, have provided companies with new avenues to boost their earnings. With the industry valued at approximately $250 billion and expected to grow at a compound annual rate of 9% through 2028, long-term investments in gaming stocks present an opportunity to profit from this consistent development.
Notably, several companies have positioned themselves powerfully in the video game industry and are expected to see significant gains over the long term. These companies, including AMD, Microsoft, and Intel, have established themselves as key players in the gaming sector and offer promising prospects for investors.
Advanced Micro Devices (AMD) is a leading tech giant that has made impressive strides in artificial intelligence (AI). However, even before venturing into AI, AMD had already solidified its position in the gaming community. The company’s computing hardware, such as graphics processing units (GPUs) and central processing units (CPUs), are widely used by gamers worldwide to build high-performance gaming PCs. Additionally, AMD has successfully penetrated the console market, being the exclusive supplier of chips to Sony’s PlayStation 5 and Microsoft’s Xbox Series X|S. Over the past five years, AMD’s gaming segment revenue has risen by 30% to $1.5 billion, with operating income up by 72% to $208 million. Despite its forward price-to-earnings ratio (P/E) of 55, analysts predict that AMD’s earnings could reach $5 per share by fiscal 2025, projecting an 87% growth over the next two fiscal years. With these projections, AMD presents an attractive investment opportunity in the gaming industry.
Microsoft, known for its flagship product Xbox, is a major player in the video game market. With the launch of its first console in 2001, Microsoft managed to challenge the dominance of Japanese firms Sony and Nintendo. Leveraging its software expertise, Microsoft introduced Xbox Game Pass, a groundbreaking video game subscription service often described as the Netflix for games. This service allows users to access a vast library of new and old titles for a fixed monthly fee, making Xbox the best-valued console option. The number of Game Pass members has risen by 150% to 25 million from 2020 to 2022. To bolster the content on the service, Microsoft has acquired several game developers, including the acquisition of Activision Blizzard. While Microsoft’s forward P/E of 33 makes its stock appear pricey, the company’s position as a market giant and its free cash flow of $63 billion in 2023 justify the premium price. Therefore, Microsoft presents an attractive opportunity for investors looking to invest in the video game industry.
Intel, despite not being the first company that comes to mind in gaming discussions, has gained significant traction within the gaming community due to its powerful CPUs for gaming PCs. In 2022, Intel diversified its gaming position by launching its first consumer GPUs, which faced initial challenges due to macroeconomic headwinds. However, with easing inflation, gaming GPU demand is expected to trend upwards. In the third quarter of 2023, Intel’s client computing segment, which includes gaming income, experienced a 43% growth in operating income to $2 billion. Analysts predict that Intel’s earnings per share will reach nearly $3 over the next two fiscal years. Multiplying this figure by Intel’s forward P/E of 53 projects a stock price of $140, indicating a potential growth of 180% by fiscal 2025. Consequently, Intel offers a promising investment opportunity in the video game industry.
In conclusion, the video game industry is poised for significant long-term growth, presenting attractive options for investors. Companies like AMD, Microsoft, and Intel have established themselves as key players in the gaming sector and offer promising prospects. Despite their varying forward P/E ratios, these companies have proven themselves capable of delivering strong financial results. As the world’s most valuable companies, including Microsoft and Apple, continue to invest in the gaming sector, the consistent demand for new gaming content and hardware upgrades ensures reliable gains for these companies and their investors over the long term.
