During the 2008 financial crisis, experts began to believe the video games industry was recession-proof as gamers remained eager to spend on consoles. The market has changed considerably since then, with new avenues for companies to boost revenue, such as mobile games and microtransactions. As a result, it remains an attractive market for investment.
The games industry was tested again by last year's economic downturn. The PC side of the market suffered steep declines in consumer spending. However, interest in consoles remained strong, as Sony shipped 19 million PlayStation 5s in fiscal 2022, beating a forecast of 18 million.
Today it might not be a bad idea to strengthen your portfolio by adding a gaming stock. Shares in some of the biggest companies in the market, such as Sony and Microsoft, might make attractive options. However, some of the sector's lesser-known players could offer larger gains over the long term, as they have more room for growth.
Here are two under-the-radar gaming stocks you can buy and hold for the next decade.
1. Amazon
Amazon (AMZN -3.65%) isn't the first company to come to mind in a discussion about gaming, as it's best known for its e-commerce and cloud computing offerings. However, the company has a growing venture in the market with its Prime Gaming platform and ownership of Twitch, the world's biggest live-streaming service.
Since 2020, the number of Prime Gaming users has grown 25%, hitting 177.5 million last year. Meanwhile, the company has hired industry veterans, such as World of Warcraft developers, to produce in-house titles.
Amazon has launched a few duds, but the release of New World in September 2021 was a promising step in the right direction. The game achieved financial success, hitting $238 million in gross revenue.
However, Twitch is arguably Amazon's biggest claim to gaming. The platform is the No. 1 place for game streaming, attracting close to 8 million monthly users. Twitch earned an estimated $2.8 billion in revenue in 2022, an increase of more than 200% since 2018.
Amazon has a long way to go in its gaming endeavors. However, the company has the brand recognition and vast financial resources to continue investing in the sector. As a result, Amazon stock is an excellent gaming stock to buy now and hold over the next 10 years.
2. Advanced Micro Devices
Advanced Micro Devices (AMD -3.65%) has become a favorite on Wall Street this year thanks to its potential in artificial intelligence. However, the company's chips gave it a powerful position in gaming over the years. AMD started its venture into the market by becoming a leading name in the PC gaming market, with its computing components powering custom-built PCs worldwide.
However, in 2020 AMD achieved a crucial role in the console side of the market. The company became the exclusive supplier of chips to Sony's PlayStation 5 and Microsoft's Xbox Series X|S game consoles. The partnerships bolstered AMD's gaming business, with its gaming revenue rising by 21% year over year in fiscal 2022, driven primarily by console sales.
For reference, AMD's biggest competitor, Nvidia, experienced a 27% decline in its gaming segment. Nvidia's more PC-focused business proved more vulnerable amid economic challenges.
AMD's semi-custom chip business gives it a solid outlook over the long term as the company expands partnerships across gaming. In addition to the PlayStation and Xbox, AMD chips are powering a growing number of handheld devices. Meanwhile, the swiftly expanding virtual reality industry could see companies like Meta turn to AMD to take its headsets to the next level.
Like most tech industries, gaming is increasingly reliant on powerful chips to move the sector forward. Gaming requires powerful graphics processing hardware to run new titles, which are only growing in detail and complexity. Consequently, AMD stock is an attractive way to invest in the developing market over the long term.
