The global video gaming industry is expected to generate nearly $176 billion in revenue in 2021, according to analytics and market research provider Newzoo, a figure that's expected to balloon to over $200 billion by 2024 as more gamers join the bandwagon. Newzoo estimates that the number of gamers could increase from an estimated 2.96 billion this year to 3.32 billion in 2024, ideally leading to an increase in video gaming hardware and software sales.

There are several stocks investors could buy to tap into the massive video gaming opportunity. Advanced Micro Devices (AMD -2.69%) and Take-Two Interactive Software (TTWO 0.01%) are two of the best. Let's see why.

Two gamers with controllers in their hands, sitting on a sofa.

Image source: Getty Images

1. Advanced Micro Devices

As more people start playing video games and existing players upgrade their gaming setups, the demand for video gaming hardware can be expected to increase. Jon Peddie Research estimates that the sales of PC (personal computer) gaming hardware could increase at a rate of more than 20% a year through 2024.

Similarly, the latest generation consoles from Sony and Microsoft are set to enjoy impressive sales growth in the coming years. According to a third-party estimate, the annual sales of Sony's PlayStation 5 console could hit 50 million by 2023, compared to nearly 5 million last year. Meanwhile, the Xbox Series X could clock annual shipments of 30 million units in 2023, compared to an estimated 3.3 million units last year.

AMD's central processing units (CPUs) and graphics processing units (GPUs) put it in a solid position to take advantage of the growth in gaming hardware sales.

AMD's Ryzen CPUs are reportedly ahead of the competition when it comes to running video games. Not surprisingly, AMD has logged six straight quarters of market share growth in PC CPUs thanks to its Ryzen processors. On the other hand, AMD is gaining traction in the graphics card market currently dominated by Nvidia. This is another fast-growing gaming niche, as the GPU market is expected to generate $44 billion in revenue by 2023, compared to $29 billion last year, according to Jon Peddie Research.

The strong demand for AMD's graphics cards and CPUs drove impressive growth in the company's computing and graphics segment in the third quarter. The segment recorded 44% year-over-year growth to $2.4 billion, and it could keep getting better as PC hardware sales increase.

It is also worth noting that AMD is supplying semi-custom chips to Microsoft and Sony for their latest consoles. This has sent its enterprise, embedded, and semi-custom (EESC) revenue soaring, with the segment recording 69% year-over-year growth last quarter to $1.9 billion. Given that the latest console cycle is in its early phases of growth, AMD's EESC business looks set for better times ahead.

The gaming business will be a key factor in driving AMD's earnings growth in the long run. Analysts expect the company to clock 35%-plus annual earnings growth for the next five years, making AMD an ideal bet for investors looking to buy a video gaming stock right now.

2. Take-Two Interactive Software

While AMD is a play on the hardware side of the video gaming market, Take-Two Interactive gives investors the opportunity to profit from rising sales of gaming titles. A third-party estimate puts the potential size of the video game software market at more than $452 billion in 2030, compared to $166 billion last year.

Take-Two Interactive makes some of the most famous household-name games on the planet. The record-breaking Grand Theft Auto series, for instance, has sold over 335 million units. Grand Theft Auto V alone shipped over 155 million units, making it the best-selling game of all time. Meanwhile, the Red Dead Redemption series has sold over 62 million units globally.

The company also owns other popular intellectual properties, such as the NBA 2K Series, Borderlands, WWE2K, and others. The company is present on all gaming platforms, with its studios churning out games for the console, PC, and mobile markets. This combination of a wide range of titles and presence across different types of gaming hardware has given rise to a sticky customer base. Take-Two's diverse product portfolio explains how the company delivered better-than-expected results last quarter despite delaying the launch of a few important games.

Take-Two's fiscal 2022 second-quarter bookings came in at $985 million, way ahead of the company's guidance range of $815 million to $865 million. It also saw a 7% increase in recurrent consumer spending compared to the originally anticipated decline of 11%, driven by the strong customer engagement of its existing games.

Investors shouldn't forget that Take-Two is facing tough year-over-year comparisons, as sales of video games had skyrocketed last year on account of the pandemic. However, the increased recurrent consumer spending and the company's ability to drive more revenue from its existing titles led to a stronger performance last quarter and encouraged Take-Two to raise guidance.

The company now expects full-year bookings to land between $3.3 billion and $3.4 billion, up from its prior estimate of $3.2 billion to $3.3 billion. More importantly, Take-Two's top-and-bottom-line growth could hit a higher gear in fiscal 2023, which begins in April next year. That's where the company starts to move beyond difficult year-over-year comparisons.

Analysts expect Take-Two to deliver 15% revenue growth next year, while earnings per share are expected to jump nearly 37%. Given that Take-Two has a pipeline of more than 60 games under development that should hit the market by fiscal 2024, the company looks well-placed to sustain its momentum and remain a top video gaming stock over the long run.