After a relentless climb that lasted more than a decade, major players in the video-game industry saw their stocks pause for a breather in 2018. Keen interest in free-to-play games and the battle royale genre, including PUBG's PlayerUnknown's Battlegrounds and Epic Games' Fortnite, had many investors wondering if the epic run of video-game stocks had come to an end.

However, those fears were put to rest in 2020, as the emergence of COVID-19 and the resulting stay-at-home orders breathed new life into the video-game industry, which is experiencing soaring adoption and strong engagement.

Three out of four people in the U.S. are currently playing video games, according to a report from industry follower NPD Group (by way of TechCruch), amounting to about 244 million gamers -- up sevenfold from just 32 million in 2018. Worldwide, gamers will spend an estimated $159 billion in 2020, and that figure is set to climb to more than $200 billion by 2023.  

For investors looking to capitalize on the trend, here are three stocks well positioned to reap the rewards of the massive adoption of gaming.

Man in a shirt and tie counting out a large stack of $100 bills to another man's waiting hand.

Image source: Getty Images.

Take-Two Interactive: A trifecta of games

Take-Two Interactive (NASDAQ:TTWO) is best known for its Grand Theft Auto (GTA) franchise, but over the past several years, the company has been building out its stable of popular titles, boasting three of the top 10 selling games in June, according to NPD. 

In addition to its flagship GTA 5, which was the fourth most popular title, Red Dead Redemption II scored the sixth spot on the list, while NBA 2K20 came in at No. 8.

Take-Two Interactive has parlayed this trifecta of games into strong financial results. For its fiscal first quarter, which ended June 30, net revenue grew to a record $831 million, up 54% year over year. Recurrent consumer spending, which includes virtual currency, add-on content, and in-game purchases, grew 52% and represented 58% of the total. This helped drive earnings per share up an impressive 88%. 

That's not all. Earlier this year, Karl Slatoff, president of Take-Two, said the pipeline of new games was the "strongest in our company's history," with 93 full-game releases over the coming five years, including 67 purchase games and 26 free-to-play titles. 

That should give Take-Two plenty of additional content to engage fans for years to come.

Hands in a dimly lit room holding a video game controller.

Image source: Getty Images.

Nintendo: Hit games and console

Nintendo (OTC:NTDOY) is another beneficiary of the stay-at-home economy. The Nintendo Switch, originally released in 2017, has become a hot property in 2020, sold out at most major retailers for months as consumers have sought in-home entertainment options and the number of casual gamers soared. In the most recent quarter, sales of the consoles were up 166% year over year,

Another factor contributing to the scarcity of the Switch is the company's latest hit game, Animal Crossing: New Horizons, which quickly climbed the charts to become the most popular Switch game ever. The title currently holds the No. 3 spot on NPD's Top 10 rankings, holding its place from last month. Since the game's release in March, it has sold a whopping 22.4 million copies. 

And that's not the only entry. Nintendo also boasts Ring Fit Adventure, which soared up the rankings from No. 835 all the way up to seventh place, while Mario Kart 8: Deluxe climbed two spots from No. 11 to No. 9. It's important to note that for each of these games, digital sales that occurred on the Nintendo eShop aren't included, meaning their rankings could actually be higher. 

Hardware sales grew 167% year over year, while software sales jumped 123%. The one-two punch of games and consoles has energized Nintendo's financial results, as net sales climbed 108% over the prior-year quarter and earnings per share soared 541%. 

With the pandemic ongoing, Nintendo still has much more runway for growth.

Gamer wearing a headset livestreaming on a smartphone.

Image source: Getty Images.

Activision: Big revenue growth

Earlier this month, Activision Blizzard (NASDAQ:ATVI) reported results for its second quarter that surpassed even the most enthusiastic projections. The company is known for its Call of Duty, World of Warcraft, and Overwatch franchises, among others.

Call of Duty: Warzone, Activision's free-to-play battle royale game, was released in the first quarter to rave reviews and robust demand, notching 75 million players to date. During the quarter, games in the Call of Duty: Modern Warfare universe saw an eightfold increase in hours played over the same time last year. 

That wasn't all. Candy Crush, the company's free-to-play franchise, was the top-grossing franchise in U.S. mobile app stores.

As a result, revenue from the Activision segment grew 270% year over year, the Blizzard segment grew 20%, and the King segment edged 11% higher. Overall, the company's revenue grew 38%, while earnings per share jumped 75%.

Activision has additional catalysts queued up for later in the year, with Crash Bandicoot 4: It's About Time scheduled for release in October, and Shadowlands, the next expansion of World of Warcraft, due out later this year.

ATVI Chart

Data by YCharts

Game on!

Each of these companies has outpaced the broader market so far in 2020, but the year is far from over. The pandemic continues, and many health professionals fear the recent resurgence of COVID-19 cases will only increase in number in the fall. Stay-at-home stocks -- like these video-game stalwarts -- are likely to be safe bets for continued gains in the months and years to come.