5 Best Video Game Stocks to Buy Now

In this article, we discuss the 5 best video game stocks to buy now. To read the analysis of the video game industry, go directly to 12 Best Video Game Stocks to Buy Now.

5. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 97

Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor company. It makes it to our list of best video game stocks due to its graphic processing units (GPU) which are used by gamers and game developers.

Advanced Micro Devices, Inc. (NASDAQ:AMD) has recently started making strides in the gaming segment, specifically on handheld personal computers. On April 25, the company announced its new AMD Ryzen Z1 and Ryzen Z1 Extreme which are specifically designed for handheld gaming PCs. The latter one is an 8-core/16-thread processor and provides 8.6 teraflops of graphic performance.

In Q4 2022, 97 hedge funds held Advanced Micro Devices, Inc. (NASDAQ:AMD) shares worth $5.7 billion, compared to 89 hedge funds at a combined value of $4.99 billion in the previous quarter.

White Falcon Capital Management made the following comment about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q1 2023 investor letter:

“Last quarter we added Advanced Micro Devices, Inc. (NASDAQ:AMD) to the portfolio at 18x earnings and quickly made it into a top 5 position. At that time, Mr. Market was worried about earnings revisions for semiconductor stocks. In Q1 2023, it has been one of our best performing positions with the stock up 50%! In just three months, the market realized that Artificial Intelligence (AI) and related technologies require a lot of semiconductors. Mr. Market really is manic depressive but this volatility can give the enterprising investor just enough of a window to pick stocks with attractive risk rewards.”

4. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 99

The Walt Disney Company (NYSE:DIS) is one of America’s largest mass media and entertainment conglomerates. The company used to publish several Disney and non-Disney games through its Disney Interactive Studios, Inc. division. The division closed down in 2016 and now The Walt Disney Company (NYSE:DIS)’s video games division is handled by Disney Entertainment.

On April 24, Wells Fargo analyst Steven Cahall reaffirmed an Overweight rating on The Walt Disney Company (NYSE:DIS)’s shares and raised the price target to $147 from $141. The analyst expects the company to reach $100 billion in revenue through Disney+, Hulu, and ESPN.

Due to the economic slowdown, The Walt Disney Company (NYSE:DIS) is laying off employees to save costs. The company is looking to lay off 7,000 employees in the current year. In February’s earnings call, The Walt Disney Company (NYSE:DIS)’s CEO, Bob Iger said that the company is targeting $5.5 billion in cost savings.

VGI Partners Global Investments Limited made the following comment about The Walt Disney Company (NYSE:DIS) in its 2022 annual investor letter:

“The Walt Disney Company (NYSE:DIS) is a diversified media conglomerate operating media networks, theme parks, film and TV studios and direct-to-consumer streaming services. It is the global leader in theme parks with hotels and cruise lines aimed at families. Key assets within Disney are the instantly recognisable entertainment franchises that have multiple avenues of monetisation such as Mickey Mouse, Star Wars, ABC and Marvel’s Avengers.

Disney’s share price declined due to a number of factors in 2022, presenting us the chance to purchase a long-admired business and its unique collection of valuable intellectual property assets at what we consider to be a very attractive valuation. Summarily, the EPS of Disney has declined from US$7 in 2018 to ~US$2.60 in 2022 but we believe that the earnings power of the assets has not diminished to anywhere near this extent.

Disney is currently undergoing a business transition within the Media and Entertainment Distribution division (DMED) from traditional media property distribution via third parties (i.e. cinemas and broadcast networks) to a Direct-To-Consumer (DTC) model via the Disney+ streaming service. A key element of our thesis is that the earnings power of the company is currently being masked by the marketing and content investments within Disney+ and that this will normalise over the next several years. To put this in perspective, Disney+ (DTC sub-segment) currently generates operating losses of over US$3.3bn (a negative 14% operating margin) compared to operating margins at its nearest streaming competitor, Netflix, of +15.5%…” (Click here to read the full text)

3. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 106

NVIDIA Corporation (NASDAQ:NVDA) is a diversified technology company that manufactures and sells several products like computer hardware/software, semiconductors, chipsets, TV accessories, and GPUs for gaming. The company’s gaming segment is one of its largest divisions which brought in almost 30% of the company’s revenue in Q4 despite the segment declining 46% YoY.

In its Q4 press release, NVIDIA Corporation (NASDAQ:NVDA) announced a 10-year partnership with Microsoft Corporation (NASDAQ:MSFT) to bring its Xbox and PC games to its cloud gaming service, GeForce NOW™. In addition, the company announced the launch of its new GPU, GeForce RTX 4070 Ti on the same day.

NVIDIA Corporation (NASDAQ:NVDA) is expected to announce its Q1 2023 results on May 24. In the previous quarter, the company provided revenue guidance of $6.50 billion, plus or minus 2%,, and net income guidance of approximately $50 million. Furthermore, NVIDIA Corporation (NASDAQ:NVDA) expects its non-GAAP gross margins at 66.5%, plus or minus 50 bps.

Aristotle Atlantic Partners made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2023 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) contributed to outperformance, as the company announced better-than-expected fourth quarter earnings driven by a strong rebound in Gaming and an improving outlook for the Datacenter business due to the acceleration of Graphics Processing Unit (GPU) driven Artifical Intelligence (AI) deployment. The company also hosted its Global Technology Conference (GTC) in March where it further highlighted its leading technology being used to develop AI Large Language Models (LLM). The company announced new partnerships with hyperscalers for its AI cloud-based service while also releasing new software and hardware offerings that will support GPU-driven AI growth. Nvidia continues to see a growing addressable market for its products and services as AI uses become more prevalent.”

2. Activision Blizzard, Inc. (NASDAQ:ATVI)

Number of Hedge Fund Holders: 129

Activision Blizzard, Inc. (NASDAQ:ATVI) is a California-based video game publisher. Its most noteworthy games include the Star Trek series, WarCraft, James Bond series, and Sekiro along with several others. The stock is currently in the limelight after regulators in the UK blocked Microsoft’s planned buyout of the company.

In the fourth quarter of 2022, 129 hedge funds held stakes in the company, compared to 96 in the previous quarter. Berkshire Hathaway was the most prominent stakeholder of the company in Q4 with over 52.717 million shares worth $4.035 billion.

In the last three months, 14 Wall Street analysts have covered Activision Blizzard, Inc. (NASDAQ:ATVI) stock and all of them maintain a Buy rating on its shares. The average analyst price target is around $92.54.

Atai Capital made the following comment about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q1 2023 investor letter:

“Those familiar with Activision Blizzard, Inc. (NASDAQ:ATVI) will quickly realize this is by no means a small-cap stock and boasts a rather large $66B market cap. While our focus is firmly on small-cap stocks, there will be occasions when I see something in large-cap land that piques my interest.

For those unfamiliar with Activision Blizzard, they are a video game developer and publisher being acquired by Microsoft at $95/share. They develop and own IPs such as Call of Duty, World of Warcraft, Diablo, Overwatch, Hearthstone, and Candy Crush. These are some of the most valuable IPs in gaming, from both a business perspective and a popularity perspective. I’ve been an avid gamer for years and am not a fan of most of their games (quite the opposite actually), but I can still appreciate how valuable these IPs are. Activision games have some of the lowest expectations in the industry but still sell millions of copies. They are currently churning out a new Call of Duty every other year with practically no differences between the titles, and yet gamers consistently buy these “new” releases, every, single, time. In fact, the most recent release (MW2) was the fastest-selling COD game ever, amassing over $1B in sales in the first ten days after release. Candy Crush has been the top-grossing game franchise in the U.S app stores for twenty- two quarters in a row, and Diablo 4 is very likely to out-sell its predecessor Diablo 3 (30M+ copies over its lifetime) while being just as monetized via in-game skins and DLC’s if not better. Throw in the gaming secular tailwind, a highly competent CEO – Bobby Kotick, and I consider Activision to be a great business (what I’ve stated here is just high level of course) …” (Please click here to read the full text)

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 259

Microsoft Corporation (NASDAQ:MSFT) is the largest software producer in the world by revenue. Microsoft Corporation (NASDAQ:MSFT) is the creator of the Xbox gaming console. As of March 2023, the company has sold over 18.5 million Xbox Series X and Series S consoles since it was launched.

Microsoft Corporation (NASDAQ:MSFT) operates its video games division through Xbox Game Studios. In 2015, the division acquired the Swedish game developer, Mojang Studios. In February 2022, the company also announced the acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI) for $69 billion. However, UK’s regulatory authority blocked the deal on April 26 stating competition concerns. According to the regulatory body, Microsoft Corporation (NASDAQ:MSFT) already covers 60% to 70% of the cloud gaming market.

Microsoft Corporation (NASDAQ:MSFT) announced its Q3 2023 results on April 25. The company reported an EPS of $2.45, outperforming the estimates by 22 cents. Moreover, the company generated $52.86 billion in revenue, representing a 7% increase from the same quarter of 2022 and exceeded the estimates by $1.85 billion.

Polen Capital made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2023 investor letter:

“Microsoft Corporation (NASDAQ:MSFT)’s fundamentals have largely stayed intact despite the headwinds many technology companies are facing due to the macroeconomic environment. While growth has decelerated below our longer-term target (we expect low-double-digit revenue growth over the next 3-5 years), we believe the deceleration should prove to be ephemeral. Azure and Office Commercial remain bright spots, while Windows OEM has been and will continue to be a drag over the next few quarters. With respect to Azure, even at a decelerated rate, the business continues to grow well. After eight consecutive quarters of Azure’s top line growth being in the mid-to-high-40s range, over the last two quarters, growth has been 42% and 38%, respectively. Microsoft is a scaled business with multiple and interlocking competitive advantages, and we believe the company will compound at high rates for a long period of time.”

You can also look at the 15 Largest PC Companies in the World and the 16 Best Places to Live in South Carolina for Retirees.

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