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Can the eSports Boom Offset Crypto Headwinds for NVDA, AMD?

By Matt McCallApr 13, 2018

World economic growth remains solid, earnings for the S&P 500 are expected to grow an incredible 17.2% this year and even despite a correction, the stock market still favors the bulls. There’s no question this is the kind of environment to be invested in.

A lot of industries are on fire right now, but I’m keeping a particularly close eye on eSports. This new world of online gaming is the fastest-growing segment within the larger sports and video game sector. It’s an area I follow closely, especially as its market is expected to increase 38% this year to $905 million.

There are several ways to play this growing trend, and they range in everything from video game companies to the makers of the consoles to the online platforms and even the sponsors. In fact, I talked about one of my favorite ETF investments in this space in a recent article.

Focusing on the Chipmakers

A more picks-and-shovels approach to the eSports sector is through the chipmakers that power the gaming consoles. Nvidia (NVDA) stands out as a leader here, as it makes high-end graphics processing units (GPUs). It’s also a leader in several other NexGen investment themes, including artificial intelligence, autonomous vehicles and even cryptocurrency mining.

The company was having some issues keeping up with demand for its products when bitcoin and other cryptocurrencies were hitting highs, and now that the crypto craze has slowed dramatically there are some concerns that it could hurt both NVDA and competitor Advanced Micro Devices (AMD).

Regardless, NVDA remains one of my favorite technology companies both today and for long-term gains. On the other hand, AMD isn’t a name I’d be running out to buy right now. The company also makes graphics cards, but without the robust business generated from other innovative sectors – like NVDA has – AMD has struggled with the slowdown in crypto.

I have no doubt that the cryptocurrency market will come back in time, and when it does NVDA will be in prime position to maintain its position as a leader in the industry. Plus, it will only add to its already strong underlying business. AMD could benefit as well, but until its other businesses catch up I am staying away.

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