THE GAMING INDUSTRY SOARS Insights from an International Chief Trading Strategist

THE GAMING INDUSTRY SOARS Insights from an International Chief Trading Strategist
Fred Razak, Chief Trading Strategist at CMTrading

Johannesburg, 7 August 2023:  The global gaming industry is experiencing a remarkable revenue growth rate of 7.89%, defying bearish economic sentiments worldwide. With the industry projected to continue thriving, investors are curious about the factors driving its success and what the future holds. Fred Razak, Chief Trading Strategist at CMTrading, shares his insights on this gaming phenomenon and highlights two key players in the market: Nvidia and Electronic Arts (EA).


Unveiling the Gaming Boom


“A revenue growth rate of 7.89% is truly remarkable, especially considering the market value is fast approaching half a trillion dollars. The gaming industry has been the fastest-growing sector for some time now,” remarks Razak. “Games are evolving, becoming lengthier and more immersive, allowing individuals to disconnect from reality for extended periods. Moreover, the interactive nature of gaming taps into psychological desires and needs like no other medium. Younger generations now gravitate towards gaming instead of traditional entertainment avenues like movies, sparking an undeniable demand for gaming experiences.”


Comparing the gaming industry to other entertainment streams is revealing. Razak highlights that the movie industry generates US$77 billion and the music industry US$26 billion, while the gaming industry has now surpassed US$365 billion and continues to expand.


Nvidia: Positioned for Phenomenal Growth


“Nvidia’s strategic focus on the gaming industry has led to substantial investments in cutting-edge hardware technology. Their chip technology is now enabling hardware to support AI, positioning Nvidia to benefit from the gaming industry’s growth and the projected AI boom,” explains Razak. “AI’s potential impact on the market is projected to be in the trillions of dollars, and Nvidia’s stock price is likely to reflect this growth. The company’s stock has already skyrocketed from $40 per share in January 2020 to $469 presently, and it may still be undervalued at this rate. The sky is the limit for Nvidia.”


Razak emphasises that Nvidia has set itself up perfectly for future growth and is ready to capitalise on the market’s demands. While inflation and interest rates have been dominant concerns for many investors, Nvidia has proven that there are thriving markets amidst uncertainty. Additionally, other players are expected to contribute to hardware and software growth, leading to potential new partnerships among established companies.


EA’s Success Story Continues


“EA’s longstanding presence in the industry gives them a competitive advantage. However, what sets them apart is their culture of innovation, reminiscent of Steve Jobs’ approach to Apple,” says Razak. “EA’s in-game monetisation model is a dream for companies—offering customers the option to pay for aspects they desire within the game. It’s akin to Burger King charging a customer more to finish their Pepsi.  While there’s some negative sentiment surrounding this model, in the long term, it allows customers to pay for only what they want, driving revenue for EA.”


Razak points out that EA achieved strong profits in 2022 despite underdelivering on expectations. The World Cup bolstered their robust first quarter in 2023 at the end of the previous year and the success of EA’s FIFA franchise. The boundaries between reality and virtual reality are blurring, with the gaming experience extending beyond the game itself, engaging audiences in new and innovative ways.


The Future of Gaming


“As games become more tangible, and virtual reality technology continues to blur the line between the virtual and the real, we anticipate continuous growth in the gaming industry,” predicts Razak. “There are already movies depicting a future where we live more in the gaming world than the real world. This isn’t a casual prediction, as the trend towards increased tangibility and immersive experiences fuels the industry’s expansion.”


While predicting the specific trajectory of any company five to ten years from now is challenging due to the ever-evolving competitive landscape, Razak believes that barring any drastic changes, such as a shift away from computers, Nvidia and EA will remain among the largest companies globally for the foreseeable future.


Stock trading and investing of both EA and Nvidia can be done in South Africa on the CMTrading platform.


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CMTrading is the brand name of Global Capital Markets Trading Ltd (A Seychelles company, company no. 104785)