We recently published a list of the 10 Best Video Game Stocks to Buy Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other best video game stocks to buy now.
Overview of the Gaming Industry
The video game industry boomed between 2019 and 2021 due to the social distancing effects of the COVID-19 pandemic, which forced people to find new entertainment platforms. According to the US International Trade Administration, there were around 2.7 billion gamers worldwide in 2020, and around 75% of all US households had at least one gamer.
According to Grand View Research, the global video game market was estimated to be around $217.06 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 13.4% between 2023 and 2030. The growth of this market is attributed to the emergence of high bandwidth network connectivity, the ongoing trend of online gaming, and the continuing demand for 3D gaming.
Furthermore, a continual upsurge in the penetration of smartphones is making video games more accessible, social, and portable. The development of more powerful and technologically advanced smartphones has further supported the ongoing expansion of the video game industry. To support this momentum, key market players are developing advanced gaming services and products to expand the customer base, which is having positive overall effects on the industry.
According to the “United States Gaming: Market Share Analysis, Industry Trends & Statistics, Growth Forecasts 2019-2029” report released by ResearchAndMarket, a study by ESA found that the US had over 227 million video game players in 2024. Around 80% of the players were over 18 years of age, while 76% of American children under 18 were players. 74% of households had at least one video game player. During the pandemic, 71% of parents agreed that video games proved to be a much-needed break for their children. Similarly, 66% of parents believed that the transition to distance learning was made easier and more accessible by video games.
READ ALSO: 12 Best Education Stocks to Buy in 2025 and 10 Best Vaccine Stocks to Buy According to Hedge Funds.
Mobile Gaming to Dominate the Market
Smartphones have become a primary medium in the video gaming industry. According to the report, 57% of individuals used smartphones to play games in 2024. 42% used personal computers, while 46% employed consoles. In addition, 29% spent around 1 to 3 hours per week on the activity, while 77% spent more than 3 hours a week. 51% of individuals spent more than 7 hours playing video games in the US in 2024.
Experts anticipate the mobile gaming segment to continue dominating the market in the future as the most favored form of gaming in the US, surpassing both PC gaming and console gaming. The growing demand for mobile gaming stems from a number of technological improvements and advancements, including AR, VR, 5G, and cloud gaming. Other dominant trends in the market include the rise of the hyper-casual game genre.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 20 video game stocks. We then selected the top 10 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Microsoft Corporation (NASDAQ:MSFT) is a technology company and the largest software producer in the world by revenue. It is the creator of the Xbox gaming console and owns a number of video gaming franchises. The company reported $69.6 billion in revenue in fiscal Q2 2025, up 12%. Its gross margin dollars grew 13% and 12% in constant currency while operating income increased 17% and 16% in constant currency. Earnings per share also experienced a 10% growth, reaching $3.23. These strong results were attributed to the strong demand for Microsoft Corporation’s (NASDAQ:MSFT) cloud and AI offerings.
Microsoft Corporation (NASDAQ:MSFT) expanded its gaming portfolio by completing the $69 billion mega-acquisition of major video game publisher Activision Blizzard (ATVI) in October 2023. It is further focusing on improving the profitability of its gaming business by positioning it for long-term growth driven by higher-margin content and platform services. It is making strides in this plan, with Black Ops 6 taking the spot as the top-selling game in fiscal Q2 2025, with more players in its launch quarter than any other paid release in the franchise’s history.
The company is also continuing to see strong momentum for Xbox Cloud Gaming, with a record 140 million hours streamed in fiscal Q2 2025. In addition, its All-up Game Pass set a new quarterly record for revenue and grew its PC subscriber base by over 30%. Microsoft Corporation (NASDAQ:MSFT) expects revenue for the Gaming segment to be in the low-single-digits in the future, with Xbox content and services revenue growth to be in the low to mid-single-digits driven by first-party content as well as Xbox Game Pass.
Overall, MSFT ranks 1st on our list of the best video game stocks to buy now. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
