Microsoft (MSFT -2.65%) and Sony (SONY 3.06%) are both about to launch their next-gen gaming consoles. Microsoft's Xbox Series X and Series S will arrive on Nov. 10, while Sony's PS5 and PS5 Digital Edition will launch on Nov. 12.

There's pent-up demand for both consoles, but Sony has the incumbent advantage. The Japanese conglomerate sold 114 million PS4s over the past seven years, while Microsoft only sold 48 million Xbox Ones.

Investors who want to profit from these next-gen consoles could consider buying shares of Microsoft or Sony. However, investors seeking more passive plays could consider investing in their top suppliers, which could benefit regardless of which console wins over more gamers.

Microsoft's Xbox Series X and Series S.

Image source: Microsoft.

1. AMD

AMD (AMD 1.28%), which supplied chips for the PS4 and Xbox One, will also provide chips for the PS5 and Xbox Series consoles. Those consoles will all run on AMD's eight-core Zen 2 CPU and custom RDNA 2 GPUs.

The PS5 will run AMD's CPU at 3.5 GHz, while the Xbox Series X will run the chip at 3.8 GHz. The PS5's RDNA 2 GPU will be slightly slower than the one in the Xbox Series X, since it has fewer compute units.

Microsoft's cheaper Xbox Series S, which lacks an optical drive, will sport a 3.6 GHz  Zen 2 CPU with a slower RDNA 2 GPU than the Series X and PS5. The disc-free PS5 Digital Edition will sport the same hardware as its big brother.

AMD sells gaming console chips through its EESC (enterprise, embedded, and semi-custom) unit, which also sells EPYC CPUs for servers. The segment's revenue rose 31% year-over-year to $2.05 billion, or 31% of AMD's top line, in the first nine months of 2020 as robust sales of EPYC chips offset its slower sales of chips for the aging PS4 and Xbox One.

But looking ahead, the upcoming launches of the PS5 and Xbox Series consoles, as well as AMD's planned takeover of programmable chipmaker Xilinx, should help the EESC business fire on all cylinders again.

2. Micron

Sony and Microsoft mainly used DRAM memory chips from Micron (MU -2.94%), Samsung, and SK Hynix in their previous consoles.

All versions of the PS5 and Xbox Series consoles will use high-end GDDR6 RAM. Samsung and Micron both started producing GDDR6 RAM two years ago, while SK Hynix is still trying to ramp up its production by the end of the year.

Sony's PS5 consoles.

Image source: Sony.

Shares of Samsung and SK Hynix, which only trade in South Korea under tight restrictions on foreign investments, can't be purchased by most U.S. investors. That makes Micron the most reasonable play.

Micron has struggled since memory prices peaked two years ago, but its revenue rose year-over-year in the second half of 2020 as DRAM and NAND prices stabilized. Micron generated 68% of its revenue from DRAM chips in 2020. Another 29% came from NAND chips, and the rest came from other types of memory chips.

During last quarter's conference call, CEO Sanjay Mehrotra expected the gaming market to "drive growth" in 2021 with robust demand for its GDDR6 memory chips. Micron's GDDR6 memory also powers high-end discrete GPUs for gaming PCs. Therefore, the console and PC gaming markets could both generate significant near-term tailwinds for Micron.

3. Western Digital

Western Digital (WDC -2.66%) is expected to supply SSDs (solid-state drives) for Sony and Microsoft's latest consoles. Both consoles will store their data on NVMe (non-volatile memory express) SSDs, which are significantly faster than older SATA SSDs.

Sony and Microsoft's removal of the optical drives from their cheaper consoles, which means games need to be fully downloaded, is also expected to spark sales of bigger SSDs for additional storage.

However, only a handful of Western Digital and Seagate's NVMe SSDs are fast enough to handle PS5 and Xbox Series games. During last quarter's conference call, CEO David Goeckeler called gaming "a promising growth area" and said WD was "excited about the future of this end market".

Robust demand for Sony and Microsoft's new consoles and their storage upgrades should strengthen WD's flash business, which generated 53% of its revenue last quarter. The growth of that business should offset WD's slower sales of traditional platter-based HDDs, and potentially allow its fragile cyclical recovery in both markets -- which was disrupted by the COVID-19 pandemic -- to continue.

The bottom line

Sony and Microsoft should both post much higher gaming revenue over the next year as gamers upgrade their consoles and buy new games. The expansion of that market could also lift AMD, Micron, WD, and other suppliers -- but investors should dig deeper and see if those tailwinds can offset their other challenges.