Nasdaq+ Exclusive

“Do you know what my favorite part of the game is? The opportunity to play.”
— Onetime Chicago Bears linebacker Mike Singletary

It’s human nature: We love a contest. Win or lose, we relish the chance to pit ourselves against tough opponents.

That’s true even if our opponents are digital. Ever since Atari introduced Pong in 1972—widely recognized as the world’s first commercial video game—we’ve been hooked on pixelated entertainment that challenges us to level up.

Over 200 million Americans—that’s 65 percent of the population—fire up their PlayStations, XBoxes or other consoles for at least one hour a week. (There’s a new one that you crank like a Jack-in-the-Box.)

What’s more, people in the U.S. have spent more than $6 billion on those consoles, over $47 billion filling them with content, and $2.5 billion on gaming accessories.

Of course, consoles aren’t the only way to go. PCs command a huge share of the gaming market, too. All in, the video game industry generates more than three times the revenue of the music industry and almost four times that of the movie industry.

Those with an interest in the stock market might want to take note. New trends and technologies are about to turbocharge this relatively young form of amusement—and companies at the forefront stand to benefit. Here’s a take on some firms that fit the bill.

Putting out feelers

Thrilled by the chase? Frustrated by the trap? So-called affect-aware games use artificial intelligence to sense and react to players’ emotions by reading facial expressions, tones of voice, heart rates and so on. Some are already in the marketplace.

Detroit: Become Human, a noir-ish actioner produced by Quantic Dream that runs on PCs but not all consoles, is one example. The game maker’s parent company, NetEase Inc. (NTES), has backed this kind of emotion-inducing storytelling from the get-go, apparently to good effect. Its share price has shot up 129 percent since Quantic Dream launched Detroit: Become Human in 2018.

NTES reported a third-quarter net revenue increase of $3.7 billion, up nearly 12 percent over the same period last year. No doubt all this helped it earn a “strong buy” rating from at least 10 analysts. Appealing to our feelings clearly pays off.

Not-so-hollow victory

Exactly what does a professional services company know about gaming? The honchos at Accenture (ACN) may not be able to tell Mario from Luigi, but they clearly want in on the action when it comes to holograms: 3D images that will figure prominently in pretty much all future video game offerings.

The enterprise surprised investors with per-share earnings that were eight percent higher than expected last quarter and has bettered the S&P 500 index by nearly four percent this year.

So why is it putting money into Looking Glass Factory, a New York-based hologram company that, among other things, is designing realistic 3-D characters for play?

Accenture is likely anticipating how holograms can be used in marketing. In June 2022, Looking Glass created a large holographic display, now situated in Accenture Labs’ San Francisco offices. But with backing from a heavy like ACN, watch for Looking Glass Factory to potentially take off in the gaming sector, too.

Ray tracing for ultra-realism

Ray tracing is another recent advancement that is upgrading the quality of the video game experience and will soon be ubiquitous. The new technology renders light and shadows far more convincingly than in the past. But for PCs, it takes high-powered video graphics cards to get the full effect.

Enter Advanced Micro Devices (AMD), which is going head-to-head with Nvidia (NVDA) on that front. AMD has just shown off what its latest chip can do, and some are calling it a game changer—quite literally.

What’s more, industry experts are enthusiastic about AMD’s RX6950 XT graphics card, citing its quality and value. Not surprisingly, AMD’s share price almost doubled in 2023, placing it just behind Nvidia and Meta (META) when it comes to year-to-year performance.

Playing in the cloud

Finally, cloud technology, which delivers multiplayer games across the internet on remote servers, is expected to recognize its full potential next year. It will make popular titles available on any device and means players won’t need expensive hardware to get in on the action.

Electronic Arts (EA), one of the biggest names in gaming, was quick to recognize the possibilities of cloud computing for its products and has launched a trial featuring games streamed through its own cloud technology. Last quarter, EA’s revenues were flat year over year, but the firm is expecting a strong performance in 2024 and 29 analysts have given it the “buy” nod.

In the end, the stock market is a game, too. Have fun, but play it wisely.