Video game stocks are positioned for a major rebound in 2025, fueled by a robust slate of blockbuster releases, in accordance to a current report from Ned Davis Research (NDR).
The agency highlighted that the upcoming releases, reminiscent of Grand Theft Auto VI and the brand new Nintendo Switch 2 console, may mark the start of an period of sustained progress in gross sales for the trade.
NDR began the video game matter with a ranking of “overweight” by 2025, projecting a 22% enhance in contrast to the S&P 500 Index (SPY) in the approaching 12 months.
According to the report, the titles deliberate for 2025 will guarantee a stable progress in gross sales after years of challenges in the sector.
Key launches will drive the market
The agency highlighted among the most anticipated launches of 2025, together with Assassin’s Creed Shadows, Monster Hunter Wilds, Fables 4, Borderlands 4 and Grand Theft Auto VIthe latter with a launch scheduled for christmas purchasing season.
Furthermore, the arrival of the Nintendo Switch 2 console in 2025 guarantees a sturdy gross sales enhancesince will probably be accompanied by new video game releases from Nintendo. The new console arrives eight years after the debut of the primary Nintendo Switch, establishing it as a key catalyst for the market.
Recovery after troublesome years
Since the tip of 2021, the S&P 500 is up 27%, whereas the NDR Video Game Thematic Index it has solely grown 7%. According to the report, this hole signifies that video game stocks have vital room to get better, with clear indicators that revenue margins are bottoming out.
In 2024, many firms in the sector carried out vital employees cuts after weak post-pandemic gross sales. However, in accordance to NDR, these measures lay the muse for improved margins in the long run.
“One of the most bullish moves a company can make in a recession is to reduce fixed costs, allowing for significant profit growth when sales recover.”
AI and the way forward for video video games
Another issue highlighted by NDR is the rising adoption of synthetic intelligence (AI) in video game improvement. The use of AI may considerably cut back improvement priceswhich might additional enhance the working margins of firms in the sector.
The report additionally predicts a notable enhance in gross sales thanks to Grand Theft Auto VIwhich may attain 250 million copies bought over its lifetime, constructing on the success of Grand Theft Auto V. The latter, launched greater than 11 years in the past, is the second best-selling video game of all time, producing nice expectations for its sequel.
Investment suggestions
NDR recommends buyers acquire publicity to the sector by Global X Video Games & Esports ETF (HERO), highlighting its excessive publicity to Take-Two Interactive shares.
“We are overweight HERO compared to SPY, with a relative return of 22% in one year.”
