In the 2022 bear market, gaming stocks were some of the unexpected losers. The pandemic frontloaded gaming growth in 2020 and 2021 amid the lockdowns, but after consumers returned to pre-pandemic entertainment options, revenue growth in gaming reversed. Industry analysts at Newzoo reported a 4% decline in gaming revenue in 2022, even as the number of players rose to 3.2 billion, up from 3.1 billion in 2021. That decline has hampered growth in companies that are partially or exclusively focused on gaming.

However, if Newzoo's forecast of 3.5 billion gamers by 2025 proves true, gaming investors will likely view the 2022 revenue decline as a short-term correction. After all, according to report by Axios, the revenue decline in gaming was largely based in mobile gaming, but these games are gaining popularity in new, "mobile-centric regions" across the world. Meanwhile, PC gaming revenue continues to grow and much of the decline in console-gaming-based revenue could be sourced in lingering supply chain and game development issues from the pandemic.

As the industry experiences a likely resumption in revenue growth, gaming should again boost the tech sector and provide a catalyst for less conventional video game stocks like Advanced Micro Devices (AMD -8.14%) and Sea Limited (SE -3.29%).

1. AMD

AMD has gained notoriety in recent years as a semiconductor stock. Its twin expertise in CPUs (central processing units) and GPUs (graphics processing units) has made it a formidable competitor to Nvidia and Intel. Moreover, it has prospered as the company's chips have become essential to powering data centers.

But this success may lead investors to forget its longtime core competency in gaming. Under Lisa Su's leadership, AMD's revival has hinged partially on gaming, with the company winning contracts to power Sony and Microsoft's newest videogame consoles. Some gaming-related graphics applications have also helped bolster its successful data center business and artificial intelligence (AI) capabilities.

In 2022, gaming accounted for $6.8 billion of AMD's revenue, or 29% of the company's $23.6 billion total. That revenue did not compensate for rising operating and acquisition costs as 2022 net income fell to $1.3 billion versus $3.2 billion in 2021.

Nonetheless, investors have bid AMD stock higher amid excitement over AI in recent weeks. And though falling profits took its price-to-earnings (P/E) ratio to 106, the forward P/E ratio of 31 implies the stock may not be as expensive as it appears. Such conditions indicate that AMD could benefit from a longer-term recovery in gaming despite the recent surge in the stock price.

2. Sea Limited

Sea Limited may be less familiar to U.S.-based investors. After all, most of its business takes place in Southeast Asia.

Some investors might know Sea Limited by its Shopee e-commerce platform or its fintech segment, Sea Money. However, the company started with its gaming segment, Garena. And while Garena consists of numerous games, such as Speed Drifter and Arena of Valor, its most popular game is Free Fire, a battle royale game. Free Fire was the most popular downloaded mobile game globally from 2019 to 2021.

Revenue in Sea Limited's digital entertainment segment, which includes Garena, fell by 10.3% in 2022. But despite Free Fire's recent weakness, the segment still comprised $3.9 billion of the company's $12.4 billion in revenue in 2022. Meanwhile, growth in its e-commerce and digital financial service segments kept Sea Limited on course. As a result, overall revenue rose by 25%.

Moreover, the cost of revenue and operating expense growth grew at a slower pace. Hence, the 2022 loss of $1.7 billion was less than 2021's $2 billion loss. With that improvement, the stock has recovered significantly, more than doubling in value from the low of just under $41 per share in November.

Also, valuations remain relatively reasonable despite that gain, staying below 4 times sales. This compares to early 2021, when the price-to-sales (P/S) ratio exceeded 30. That low sales multiple could mean the stock will surge higher amid a likely resurgence in online gaming.