The video games market is projected to achieve a value of $385 billion in 2023 and rise another 36% by 2027, hitting $522 billion. Thanks to a never-ending stream of new content and technological advances, the industry is one of the most consistently expanding sectors.
Like clockwork, the developing nature of the market forces consumers to upgrade their gaming hardware every few years to continue playing the newest titles, and companies can benefit from reliable long-term growth.
As a result, it's not surprising many of the world's biggest tech companies have entered the games industry. Meanwhile, the market's consistent growth is a compelling reason to add a gaming stock to your portfolio and hold it for the long term. The right stock can strengthen your holdings and lower investment risk.
It might be tempting to seek stocks for some of the market's most dominant players, such as Sony, Nintendo, and Microsoft. However, some lesser-known options could offer more growth over the long term.
Here are two under-the-radar gaming stocks you can buy and hold for the next decade.
1. Advanced Micro Devices
All eyes have been on Advanced Micro Devices' (AMD -0.26%) prospects in artificial intelligence (AI) in 2023. However, before the current boom in AI, the chipmaker was best known for its contributions to gaming. AMD is one of the biggest suppliers of chips in the space, and as technology continues to develop, demand for its hardware will likely soar.
AMD is an attractive gaming stock as its chips allow it to benefit from multiple areas of gaming, including consoles and PCs. The company has a lucrative position as the exclusive supplier of chips to Sony's PlayStation 5 and Microsoft's Xbox Series X|S. These companies' consoles are easily two of the most popular gaming machines in the world, with AMD's stock an excellent way to benefit from the sales of both.
In fact, last year's economic downturn caused many tech companies to suffer declines in consumer spending. However, AMD's gaming segment earned its largest portion of revenue in fiscal 2022 and reported growth of 21% year over year, driven almost entirely by high demand for Sony and Microsoft's consoles.
Moreover, AMD's line of consumer computer components, such as graphics processing units (GPUs) and central processing units (CPUs), has had massive success in the personal computer (PC) gaming community. The company's hardware is used to power custom-built gaming computers worldwide and has boosted AMD's client segment over the years.
The segment had some trouble amid PC market declines last year. However, as inflation eases, AMD will be well positioned to profit from the industry's recovery and growth.
AMD's stock rose about 565% in the last five years. With the power of gaming and AI, it has the potential to continue on its current growth trajectory over the next half-decade.
2. Apple
Apple (AAPL 0.36%) might not be the first company that comes to mind in a discussion about gaming. However, the tech giant's high-profit App Store, filled with countless mobile games, and its subscription-based service Apple Arcade, have made it the third-largest games company in the world by revenue, only after Tencent and Sony.
In 2021, Apple earned an estimated $15.3 billion in games revenue, an increase of 18% from the previous year. The company's revenue grew more than any of the most renowned names in the market, including Microsoft, Sony, and Nintendo.
The iPhone maker's success in gaming is primarily driven by its App Store, where games make up about 70% of the platform's revenue. Apple charges a 30% standard commission on all app purchases, with that fee falling to 15% after a year. However, it's the free-to-play games that offer in-app purchases that have given a massive boost to the company's gaming earnings.
The explosive rise of these games helped make Apple's services segment the second-highest earning part of its business, hitting $78 billion in fiscal 2022. Meanwhile, revenue growth achieved 14%, double that of the iPhone.
Additionally, Apple's virtual/augmented reality headset, the Vision Pro, could see the company venture into the hardware side of gaming. The device launched at a starting price of $3,499, locking out many consumers. However, if future generations of the Vision Pro launch at more competitive pricing, the company could use it to expand its position in VR/AR gaming.
