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Throne of Games: How NVIDIA and Microsoft Rule

Kevin Cook
·5 mins read
  • (1:00) - Gaming Is Serious Business for NVDA and MSFT

  • (6:10) - Dave Does Disney and Was Not Amused

  • (9:45) - Gaming-as-a-Service Heats Up: Microsoft Buys Bethesda

  • (14:50) - Console Wars: Xbox and PC vs. Playstation

  • (23:00) - NVIDIA Launches Next-Gen Graphics Cards: 30 Series

  • (29:55) - Ray Tracing: Industrial Light & Magic for Games

  • (37:30) - The Netflix of Gaming: Satya Nadella's Vision

  • (44:00) - Content Communities and Exclusivity

  • Podcast@Zacks.com

  • Archive: Mind Over Money

 

Welcome back to Mind Over Money. I'm Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.

Last week I did a video and article deep-dive into a big acquisition in the gaming world...

Why Microsoft Paid $7.5 Billion for Gaming Wizard ZeniMax

In that piece, I try to uncover Microsoft's MSFT long-term gaming strategy where Xbox content and services represented the fastest growing business unit with 64% year-over-year growth to $3.33 billion in the June quarter.

Part of that successful math is that the Xbox Game Pass subscription service grew 50% during the COVID lockdown to 15 million members at $14.99 per month.

This is why Piper Sandler software analyst Brent Bracelin started calling Game Pass the "Netflix of Gaming" this year, and why I'm talking about Gaming-as-a-Service, or GaaS, as a seriously fun business worth investing in.

The video linked above is also some fun business as I describe Satya Nadella's genius plan to offer financing on the next-gen Xbox models coming in November where "players" can pay $25 per month for the new console and get Game Pass included!

Not a Fanatic Gamer, But Fanatic About Gaming Technology

As I described in Who Cares NVIDIA Makes Great Gaming Graphics?, the reason I've owned and recommended NVIDIA NVDA shares for several years is because their intense innovation with GPU architectures for gaming actually drives their R&D knowledge for machine learning, supercomputing, deep learning and, ultimately, artificial intelligence.

But since I'm not actually a gamer, and always an outsider looking in to that soon-to-be $200 billion cult, I decided to talk to an expert insider, Dave Bartosiak.

Dave runs a special portfolio at Zacks called Blockchain Innovators where he is focused on the next waves of change in fintech, payments, security, commerce, banking, and all things related to the new ways that distributed ledger technology and cryptocurrencies will transform the digital world.

He is also a veteran gamer and sports car fanatic. I didn't have a chance to ask him about whether he calls himself an amateur racing driver too, but I'm guessing he's done things in his real cars I wouldn't even know how to do in the new racing simulators.

In all cases, he was the perfect gaming fanatic to have on this episode, not least because he also owns shares of the Ferrari of gaming engines, NVIDIA. Dave understood what an NVIDIA GPU does long before I did because he grew up trying every new platform, console, and architecture to get the one thing gamers crave: the need for speed.

But he is also flexibly agnostic when it comes to his need -- he's driven muscle cars and lately finds himself in a Corvette phase with his 3rd a Z06 -- and so he's also a fan of Advanced Micro Devices AMD GPU gaming cards, and the stock. I featured his smart buy of AMD shares when he scooped them up in July of 2018 at $16 in this piece...

Release the Ryzen! AMD Roars in the Nanometer Wars

Today, many of Dave's early followers are enjoying long-term open gains in excess of 400% on AMD's rally over $80 this summer.

Gaming-as-a-Service Heats Up: What the Bethesda Deal Means

After I got Dave to tell us about his recent not-always-amusing trip to Disney's DIS Hollywood Studios and Epcot, we get down to business in the podcast.

By the way, did you know that Disney's Bob Iger paid just 7% more for both the Lucasfilm Star Wars franchise and Marvel Entertainment -- about $8 billion -- as Microsoft did for Bethesda?

We know how that turned out as Disney has turbo-charged both assets into major revenues and profits, with box office tallies north of $25 billion, the bulk coming from Marvel. And these are assets that will keep on giving for another decade, across streaming, merchandising, and experience platforms.

The common theme and opportunity for Microsoft, in its further investment in gaming, is that buying a content library like Bethesda and its 8 separate creator studios has the potential to greatly expand revenue potential in their Xbox content and services division.

I ask Dave what gamers like and don't like about the Microsoft deal and he also explains other streaming subscription services like NVIDIA's and Electronic Arts EA new cloud service called Atlas.

Dave then opines on the virtues of Xbox and PC vs. Sony SNE Playstation. And he tells us which next-gen unit he's buying next month (hint: it has a "5" in the name).

On the podcast, we also get into the launch pains for the NVIDIA GeForce RTX 3080 GPUs and what gamers should expect going forward.

Finally, I ask Dave to explain "ray tracing" in layman's terms. Oh, and I didn't even know that Amazon AMZN was launching a new cloud gaming service called Luna.

Get Dave's take on that and a whole lot more gaming mania in this episode of Mind Over Money.

Disclosure: I own shares of NVDA for the Zacks TAZR Trader portfolio.
 


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