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2 battered Nasdaq stocks that could win in a $40 billion market


Nvidia (NVDA 0.77%) and Advanced micro-systems (AMD -0.52%) are having a brutal year in the market as weak personal computer (PC) sales hurt demand for graphics cards and processors. Both stocks have lost more than 50% of their value so far in 2022, but an emerging opportunity could help them recover from the current crisis.

While demand for traditional gaming hardware and software may remain subdued in the near term due to inflation, there is a niche within this market that is growing at a breakneck pace: cloud gaming. The cloud gaming market reportedly generated just $1.7 billion in revenue last year, but it could generate over $40 billion in revenue by 2029, with average growth of over 43% per year. year over the forecast period.

This rapid increase in cloud gaming adoption is unsurprising, as it provides gamers with a cheaper alternative to playing their favorite titles. In cloud gaming, games are run on remote servers and delivered to smartphones, tablets, TVs, or PCs with a high-speed internet connection. Users simply need to buy a subscription to a cloud gaming service such as Nvidia’s GeForce Now and have a fast internet connection to start playing.

As a result, gamers don’t need to invest in expensive gaming hardware or spend money on purchasing titles. The profitable character cloud gaming is why this market is expected to take off in the future. Nvidia and AMD are two companies that could make the most of this opportunity, but which is better? Let’s find out.

Nvidia is already a major player in cloud gaming

Nvidia’s GeForce Now is the most popular cloud gaming service, with over 20 million subscribers, as the company reported in its August release. earnings conference call. That’s a big leap from February 2020, when the service was made generally available to the public with a subscriber base of one million subscribers.

The rapid growth of Nvidia’s GeForce Now cloud gaming service can be attributed to the company’s efforts to aggressively expand its library, as well as making the service available in more regions around the world. The service has an extensive library of titles. It had over 1,000 titles available to stream as of July last year, and the continued expansion of its library means gamers now have more to choose from.

Additionally, Nvidia offers two paid subscription tiers for the service, priced at $9.99 per month and $19.99 per month, giving gamers access to high-resolution games and features like than ray tracing. The combination of a strong content library and affordable costs is why Nvidia is the #1 player in the cloud gaming market.

Newzoo estimates that the cloud gaming market could have 31.7 million paying users by the end of 2022, indicating that Nvidia has already captured a significant share of the market. In addition, the company has generated estimated at $1 billion revenue from this market in fiscal year 2022, indicating that it has already cornered a significant portion of the revenue opportunities available in this space.

All of this indicates that Nvidia is in a strong position to tap into the $40 billion long-term revenue opportunity in cloud gaming. This could allow the chipmaker to breathe life into its gaming business, which is currently in decline thanks to the dependence on the sales of hardware such as graphics cards. As such, don’t be surprised to see Nvidia’s gaming revenue take off significantly in the future as new enablers, such as cloud gaming, gain critical mass and accelerate the company’s growth.

AMD is focusing on the hardware side, but that might not be enough

While AMD doesn’t have its own cloud gaming service like Nvidia, it does provide hardware to others to power their cloud gaming initiatives. For example, AMD was selected by Alphabet to power the Google Stadia cloud gaming service, providing the latter with data center GPUs (graphics processing units) as well as software development tools.

So AMD delved into the cloud gaming space before Nvidia officially made GeForce Now available to customers. Unfortunately, Alphabet is ending the Stadia streaming service, indicating that Nvidia’s strong position in this market has left little room for even bigger rivals to flex their muscles.

Nvidia relies on its own GPUs, such as the RTX 3080, to power GeForce Now. Additionally, the company is successfully building a subscription service and a predictable revenue stream using it.

Of course, the cloud gaming market is currently in its infancy and has yet to reach critical mass, so it’s time for AMD to take a slice of this emerging market. video game niche. But Nvidia seems like the best bet for investors looking to take advantage of this space.

Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Chauhan hard has no position in the stocks mentioned. The Motley Fool holds and recommends Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares) and Nvidia. The Motley Fool has a disclosure policy.