The esports market has the potential to take off in the coming years as more people tune in to watch competitive video game tournaments, leading to a sharp rise in sponsorship and advertisement revenue. According to a third-party estimate, global esports revenue could exceed $1.6 billion in 2024 compared to $947 million last year. What's more, the number of people watching esports is expected to reach 577 million by 2024.

The prize money offered by esports tournaments has been rising rapidly as well, leading to increased participation. The total prize money of esports tournaments in 2018 was nearly $165 million, and the number of active gamers stood at 23,000. Winnings increased 42% in 2019 to $236 million, while participating gamers at these events increased to over 28,000.

Esports growing popularity bodes well for NVIDIA (NASDAQ:NVDA) and Corsair Gaming (NASDAQ:CRSR). Let's see how.

Person wearing headphones looking at computer screen.

Image source: Getty Images.

NVIDIA is providing gamers with the most important tool to compete in esports

NVIDIA provides competitive gamers with a critical tool to help them succeed in this space -- graphics cards. As a result, the company has witnessed a terrific sales ramp of the company's latest Ampere-based graphics cards that deliver improved performance over their predecessors at competitive prices.

This is great from an esports perspective, as hardware performance is key to competitive gaming due to its effect on things like latency and smoothness of animations. Not surprisingly, the RTX 30 series cards are in hot demand. NVIDIA pointed out that the share of the RTX 30 cards on popular gaming platform Steam in the first six months since their launch is double that of the previous-generation Turing cards.

The Ampere architecture is NVIDIA's fastest-ramping GPU (graphics processing unit) architecture in terms of sales, and it is also driving an increase in average selling prices (ASP). In the first six months of sales since launch, Ampere cards are clocking an ASP of $360, up 20% over previous-generation offerings, indicating that gamers are willing to buy more expensive cards to improve their gameplay experience.

More importantly, NVIDIA is making esports accessible to newcomers with the launch of its new laptops. The company's RTX 30 series-based laptops are tuned to deliver high FPS and low latency at affordable prices in popular esports titles.

NVIDIA estimates around 85% of its installed graphics card user base of 140 million has yet to upgrade to the RTX class cards, and the growing popularity of esports is likely to help encourage faster adoption.

Corsair Gaming's two-fold advantage

Corsair Gaming is benefiting in two ways from the esports market. First, sales of the company's PC components business have been soaring as users upgrade their systems to boost their gameplay experience. Second, the growing popularity of esports is a boon for Corsair's creator and peripherals business.

The company believes competitive and committed PC gamers accounted for 83% of the $36 billion spent on PC gaming gear in 2019, despite making up just 18% of the total gamer population. This points toward a strong revenue opportunity for Corsair as there is a large number of gamers who may upgrade from casual gaming to committed or competitive play.

Once that happens, the demand for the company's gaming accessories is likely to increase. Corsair is one of the leading names in the PC systems and components space. According to the NPD Group, it holds the highest market share in memory, cases, power supply units, and cooling solutions, which puts it in a solid position to take advantage of future upgrades from casual gamers. Additionally, NPD says Corsair occupies the second, third, and fourth positions in the keyboard, mice, and headsets markets, respectively.

The second way Corsair can take advantage of esports is through the growth in streaming. More gamers are livestreaming their gameplay on popular platforms such as Twitch, YouTube, and others. NVIDIA estimates the number of Twitch streamers doubled in 2020, while Corsair estimates that there were six million committed streamers last year.

This growing market should support demand for Corsair's streaming peripherals -- microphones, streaming decks, and studio accessories. Again, the company enjoys strong positioning within this niche.

So Corsair Gaming is another esports stock that investors need to keep their eyes on. It is not only delivering outstanding growth thanks to the lucrative end-market it operates in, but its stock also trades at just 20 times trailing earnings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.