Today, gaming stocks are seeing some serious downside. Investors in high-profile gaming stocks such as Tencent (OTCMKTS:TCEHY), Take Two (NASDAQ:TTWO), Skillz (NASDAQ:SKLZ) and Roblox (NASDAQ:RBLX) are down substantially today. Investors in each of these global video game companies have seen declines ranging from 3% to 10% at the time of writing.
It appears there are a number of factors investors are considering with video game companies right now. To start, each of these companies boomed during the pandemic. Stay-at-home entertainment became the only option for many of us during lockdown periods. In the absence of something better to do, video game usage soared along with profits for these companies. The pandemic reopening thesis isn’t necessarily bullish for these companies.
However, today another negative catalyst is being priced in. Let’s dive into what has been driving these high-profile gaming stocks lower today.
Gaming Stocks Down on Assertions These Companies Are Providing “Spiritual Opium”
Today, a Chinese official newspaper, the Xinhua News Agency, published a scathing critique of the video game sector. Known as a platform for the Chinese Communist Party, this report called out various social issues surrounding video game usage among minors. The report went as far as to call video games “spiritual opium.”
That’s certainly not good. For Tencent, one of the biggest video game companies in the world, today’s double-digit decline is perhaps expected. However, investors will note that Tencent is the only China-based company on the list. Accordingly, this crackdown appears to have global impacts on this sector.
China is an absolutely massive gaming market. Accordingly, it’s perhaps unsurprising to see the pain of these crackdowns ripple through to other markets. Until now, most of China’s regulatory stifling of its tech sector has been limited to China.
Tencent has since pledged to deal with many of the assertions made against the sector. The extent to which other companies follow suit remains to be seen.
Additionally, Take Two recently reported earnings that missed expectations. This has furthered concerns that growth in the video game segment may be slowing as economies reopen globally.
On the date of publication, Chris MacDonald did not have (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.
