Gamers across the globe are choosing cloud-based options due to their unique advantages over traditional formats. Through cloud gaming, users can effectively play video games hosted on other servers or devices without investing in costly hardware. Hence, related stocks are likely to benefit immensely from this trend for the foreseeable future.
According to a study published by Facts and Factors, the gaming market will grow from $432 million in 2020 to $3.26 billion by 2026. This represents a mammoth annual growth rate of 43.2%, led by some of the top tech giants in the world.
Additionally, the rollout of 5G services will provide a leg up to the sector. Quicker data transfer speeds and lower latency make 5G more apt for cloud gaming than its predecessors.
With that in mind, let’s look at three needle-movers in the sector that are set to profit from the growing cloud gaming industry:
Cloud Gaming Stocks: Alphabet (GOOG, GOOGL)
Alphabet was one of the first movers in the cloud computing space with Google Stadia. The platform enables users to play a library of video games on compatible devices. Stadia was released in November 2019 and has now become an industry giant.
With Stadia, video games can be streamed and played using an internet connection without waiting for downloads or updates. No special hardware is needed, though you can opt to use the service on a TV with the Stadia controller and a Chromecast Ultra.
Though it has enjoyed considerable success in the sector, it seems to be lagging behind its competition in terms of performance, video gaming exclusivity and other services. Therefore, the next few years are critical for the company to stamp its authority again. If Stadia could generate sizeable revenues, it could help move GOOG and GOOGL stocks higher.
Nvidia’s cloud gaming service, GeForce Now, has been in the market for more than a year. So far, the results have been excellent; membership has more than doubled, reaching 12 million since its launch.
Moreover, it has contributed heftily to Nvidia’s gaming revenue, which grew by over 85% on a year-over-year (YOY) basis to more than $3 billion in its latest quarter.
Nvidia plans to make GeForce Now the gold standard for cloud gaming. It recently announced the launch of a new tier of its subscription, which promises 4K HDR gaming at far lower latencies than any of its previous services.
Additionally, it plans to work with internet service providers and telecom companies to offer GeForce Now to its users. Hence, the platform will likely become a major growth catalyst for NVDA stock in the coming years.
Cloud Gaming Stocks: Apple (AAPL)
While it isn’t strictly a cloud gaming service, Apple Arcade launched with great fanfare a couple of years ago. It offers access to a growing collection of games that can only be accessed through a device from Apple’s ecosystem.
The subscription could be a stepping stone into the cloud gaming sector — in fact, the company reportedly considered launching a cloud-based service alongside Apple Arcade.
The great thing about the service is that it only costs $4.99 per month. Moreover, it also includes family-sharing features that are accessible through the Apple One bundle.
Apple Arcade hasn’t lived up to its pre-launch hype, and the company’s own cloud gaming plans remain unknown. However, Apple’s native gaming services aren’t its only link to this growing sector. Microsoft’s (NASDAQ:MSFT) Xbox Cloud Gaming platform is available on Apple’s devices as of July.
Any way you look at it, Apple Arcade and the cloud gaming sector still have a lot of potential to contribute meaningfully to Apple’s top-line and AAPL stock.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.