Artificial intelligence (AI) has turned out to be a big catalyst for Nvidia (NVDA -1.99%) stock so far in 2023, and that's not surprising given how the proliferation of this technology has boosted the demand for the company's graphics cards.

Nvidia is set to deliver a major jump in revenue and earnings thanks to AI, but the company is also making smart moves in other areas that could supercharge its growth in the long run. The cloud gaming space is one such niche where Nvidia has been consistently looking to push the envelope and solidify its dominant position. And now, the tech giant has made another shrewd move in this market that could help it attract more users to its cloud gaming platform.

Nvidia makes a deal with Microsoft

Microsoft (MSFT -0.18%) recently announced that members of its Game Pass gaming subscription service can soon start streaming selected personal computer (PC) games on Nvidia's GeForce Now cloud gaming platform. Microsoft says that this move will "enable the PC Game Pass catalog to be played on any device that GeForce Now streams to, like low spec PCs, Macs, Chromebooks, mobile devices, TVs, and more, and we'll be rolling this out in the months ahead."

This announcement indicates that the company will be bringing more games to GeForce Now as the year progresses. It is worth noting that Microsoft and Nvidia struck a 10-year agreement earlier this year to bring Xbox PC titles to GeForce Now. The collaboration between Microsoft and Nvidia has been set in motion with the first Xbox PC title -- Gears 5 -- already available on GeForce Now.

The latest announcement of bringing Game Pass titles to GeForce Now is another move in the right direction as it will help expand Nvidia's cloud gaming library. Microsoft currently offers access to more than 100 PC games through the Game Pass service, including popular names such as the Halo series, Flight Simulator, Forza Horizon series, Minecraft, and many others.

Nvidia management pointed out during the company's May earnings conference call with analysts that it now has a library of more than 1,600 games available on GeForce Now, adding that it has "the richest content available on any cloud gaming service." That number is likely to swell as more Xbox games make their way to GeForce Now as a part of the partnership. This should give the company's growth a nice shot in the arm.

A terrific growth opportunity is in the cards

Nvidia said in February that GeForce Now has more than 25 million members across 100 countries. That's a big piece of the pie as the cloud gaming market reportedly had roughly 32 million paying users at the end of 2022. Meanwhile, those paying users reportedly spent a total of $2.4 billion on cloud gaming services from all companies last year, which translates into $75 per user.

Looking ahead, gaming analytics firm Newzoo estimates that the cloud gaming market could generate $8.2 billion in revenue by 2025. The number of paid subscribers is expected to increase to 87 million, which points toward average revenue of $94 per user. This market is expected to generate annual revenue of almost $85 billion by 2030, according to Fortune Business Insights.

There is a simple reason why the cloud gaming market is expected to take off big time in the long run. It lets gamers get access to top games without having to spend loads of money on expensive hardware or gaming titles. For instance, gamers can buy the top-tier GeForce Now subscription for a monthly fee of $20, which will give them access to an RTX 4080 graphics-card-powered server.

On the other hand, buying an RTX 4080 graphics card alone would set a gamer back at least $1,200. The cost of other PC peripherals and the game itself would add on further, which means that buying a cloud gaming subscription will turn out to be way cheaper at $240 a year. As such, Nvidia is doing the right thing by striking the partnership with Microsoft. Such a move will set the company up for success in this nascent market and gives investors another reason to buy this high-flying tech stock.