We recently compiled a list of the 7 most profitable gaming stocks to invest in. In this article, we’ll take a look at where NVIDIA Corporation (NASDAQ:NVDA) ranks among the most profitable gaming stocks to invest in.
The evolution of gaming: Key trends shaping the market
The gaming industry is currently undergoing major changes due to the evolution of technology and consumer preferences. One of the most notable trends is the integration of artificial intelligence (AI) to transform game development and player experience. AI is used to enhance gameplay by creating more realistic environments and adapting to individual player styles. We discuss this in more detail in a short excerpt from our previous article, 7 Best Gaming Stocks to Buy Now.
“According to Bernard Marr, a world-renowned futurist and author of Generative AI in Practice: 100+ Amazing Ways Generative Artificial Intelligence is Changing Business and Society, generative AI is an attractive technology for developers. Generative AI is revolutionizing video game development by providing tools that allow developers to create unique content, realistic visuals, and immersive gameplay experiences through procedural generation. We believe it can help create unique gaming environments and enable dynamic gameplay experiences that change from session to session.”
Another big trend in the gaming market is the rise of microtransactions, especially in free-to-play games. This monetization model is becoming increasingly popular as developers seek sustainable revenue sources.
On March 24, CNBC reported that the two largest U.S. video game companies, Electronic Arts and Take-Two Interactive, are increasingly relying on live service games, subscriptions, and in-game purchases for revenue. Microtransactions, which allow players to purchase virtual items and features in games using real money, have become an important source of revenue. Popular titles like Fortnite, Call of Duty: Warzone, and Clash Royale utilize this model, with players paying for ongoing updates and seasonal content through subscriptions and battle passes.
Mat Piscatella, Circana’s executive director of video games, said the industry is moving toward a “battle pass” system that packages seasonal content in a way that players find valuable. This approach has led to a more positive response from gamers as they feel they are getting consistent value for their money. This trend shows that game publishers need to continually provide players with new content to maintain interest in these live service games.
According to Comscore’s 2024 State of Gaming Report, approximately 82% of American gamers made in-game purchases in freemium games in 2023. The report also highlights that 62% of adults over the age of 18 participate in gaming activities, demonstrating the growing appeal of video games around the world. different age groups.
Esports are becoming increasingly popular, especially among younger viewers. According to the report, 86% of Gen Z and 80% of Millennials watched esports last year. Furthermore, 53% of Gen Z and 61% of Millennials consume esports content, highlighting the growing popularity of competitive gaming among these age groups.
methodology
To create a list of the 7 most profitable gaming stocks to invest in, we used Finviz and Yahoo’s stock screener to find the largest gaming companies. We also reviewed our own rankings, vetted ETFs, and consulted various online resources.
Next, we focused on profitability. From this initial list of over 20 gaming companies, we narrowed our selection to stocks with positive trailing twelve month (TTM) net income and positive net income growth over the past five years. .
To ensure the reliability of our findings, we consulted reliable sources such as SeekingAlpha, which provides insights on net income CAGR over the past five years, and YCharts, which provides information on TTM net income.
Finally, from our list of most profitable stocks that meet our criteria, we focused on the top 7 stocks that are most favored by institutional investors. Data on hedge fund sentiment surrounding each stock was obtained from Insider Monkey’s database of 912 elite hedge funds. The 7 most profitable gaming stocks to invest in are ranked below in ascending order based on the number of hedge funds that own the stock as of Q2 2024.
Why do we care what hedge funds do? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
NVIDIA Corporation (NASDAQ:NVDA)
TTM Net Income: $53.01 billion
5-year net profit CAGR: 80.81%
Number of hedge fund holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is a prominent American technology company, also known for its role in the gaming industry, particularly with its powerful graphics processing units (GPUs). Since inventing the GPU in 1999, NVIDIA has transformed computer graphics and fueled the growth of PC gaming. The company’s GeForce series GPUs are particularly popular among gamers, offering high-performance graphics for an immersive gaming experience.
In addition, the company offers GeForce NOW, a cloud-based gaming service that allows players to stream games directly from the cloud to a variety of devices, including laptops, desktops, and smartphones. The service allows gamers to access their game library from any supported device, making gaming more accessible and convenient.
NVIDIA Corporation (NASDAQ:NVDA) plays a key role in the rapidly growing artificial intelligence (AI) market. The company has seen strong growth in revenue, particularly from its data center business, which is now its main source of revenue and has outpaced its once-largest gaming division. Despite this change, NVIDIA remains one of the largest companies in the gaming industry.
The company focuses on innovative strategies to strengthen its position in the gaming market. NVIDIA Corporation (NASDAQ:NVDA) reported second quarter 2025 gaming revenue of $2.9 billion. This reflects a 9% increase from the previous quarter and a 16% increase from the year-ago period. NVIDIA has introduced some exciting technologies, including NVIDIA ACE, which uses generative AI to create lifelike digital characters and enhance player interactions. This technology allows game developers to create intelligent digital characters that can have realistic conversations, greatly improving the gaming experience.
Additionally, NVIDIA’s GeForce NOW service has grown to over 2,000 games and expanded into new markets like Japan. The launch of popular titles and partnerships with developers to integrate AI capabilities further solidify the company’s role in shaping the future of gaming. With these advances and a strong revenue growth trajectory, NVIDIA Corporation (NASDAQ:NVDA) is well-positioned to capitalize on the growing demand for innovative gaming experiences.
NVIDIA Corporation (NASDAQ:NVDA) has managed to grow its revenue at a compound annual growth rate (CAGR) of 56.73% over the past five years, while its revenue has also increased at a CAGR of 80.81% over the same period. Over the past five years, the company has also grown its leveraged free cash flow at a CAGR of 84.47%.
According to Insider Monkey’s database, 179 hedge funds held shares in NVIDIA Corporation (NASDAQ:NVDA) in the second quarter of 2024. This puts NVDA in second place on our list of the most profitable gaming stocks to invest in.
Overall, NVDA ranks #2 on the list of the most profitable gaming stocks to invest in. While we recognize the potential of gaming companies, we believe some AI stocks are more likely to deliver higher returns and do so in the short term. time frame. If you’re looking for AI stocks with more promise than NVDA, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: 15 humanoid robot stocks to buy, according to Morgan Stanley and Jim Cramer, says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article originally appeared on Insider Monkey.
