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Why Gamr ETF is making a ‘concentrated bet’ on the video game tech industry: Investor

ETF Managers Group Director Stephen Gardner joins Yahoo Finance Live to detail the gaming thematic ETF and why many analysts see the video game tech industry as laden with opportunity.

Video Transcript


RACHELLE AKUFFO: Supply chain disruptions have impacted the video gaming space as well. Hardware and software production have slowed since the start of the pandemic. But our next guest expects the video game business to reach $321 billion by 2026.

Stephen Gardner of ETF Managers Group joins us now for this week's ETF Report brought to you by Invesco QQQ. So good to have you back on the show. Walk us through this prediction here.

STEPHEN GARDNER: Thanks for having me. And it's not just my prediction, it's a number of different analysts' predictions. I mean, we saw huge acceleration and growth in the video game market, you know, with the stay-at-home. And we saw about $180 billion total sales there through the year 2021. So you know, a number of different research analysts across the board are expecting this $320 billion market across hardware, software, and different console and mobile games.

DAVE BRIGGS: So what do you make of this recent pullback in the gaming space? And Rachelle mentioned those supply chain issues, is it-- is gaming recession proof if we are to enter that type of environment?

STEPHEN GARDNER: I don't believe gaming is completely recession proof. I mean, it's-- at the end of the day, it's a discretionary spend, when you think about, you know, the total cost of living. Gaming and interactive experiences is certainly discretionary.

You know, I think we're gonna see volatility in the market if, you know, there's continued sell-off and typically has a higher beta than, you know, overall kind of blue chip tech. But you know, I don't believe it's necessarily recession proof. But over a long term, we think, you know, the total growing addressable market will drive, you know, a lot of growth within the space.

SEANA SMITH: Stephen, there certainly are a lot of players in this space. When you're trying to decipher the winners and losers here, because we certainly have seen mixed bag of earnings over the last couple of quarters from a lot of these larger players, how are you evaluating, I guess, who has the biggest potential here going forward?

STEPHEN GARDNER: So that's the beauty of the ETF. It's a passive ETF. We rebalance on a quarterly basis. And we're not picking winners and losers, per se. We're including companies that meet our rules for the inclusion within the index, and betting on the entire market to move forward and progress in terms of revenues and asset prices higher. So we're not making individual bets, but more so a concentrated bet within a theme within the tech market.

SEANA SMITH: Stephen, one of your top holdings in there is GameStop. We noticed certainly a meme favorite. It has posted annual losses now for years. Doesn't this add a little bit of risk there?

STEPHEN GARDNER: So GameStop's an interesting use case. You know, it' been in the spotlight with the meme stock trade, obviously. And you know, when we look at it, they're trying to make a transition from, you know, this brick-and-mortar retail type video game company into an e-commerce Amazon-like company. So they hired two Amazon executives in trying to make that shift.

But again, it's about 2% to 2 and 1/2% of the portfolio. Certainly, if, you know, GameStop stock falls, it's not gonna be a, you know, huge impact on the portfolio. But certainly within the top 10. But that's the beauty of having, you know, that risk spread across 90 or so names.

RACHELLE AKUFFO: And Stephen, also in those holdings, we see Roblox, which is essentially sort of the future of gaming play here. Walk us through what you're seeing, in terms of investing in Roblox as an opportunity and when you expect to start seeing that really pay off.

STEPHEN GARDNER: Yeah, I think Roblox is a great use case in terms of what we might see going forward within, you know, this metaverse and Web 3.0 world in terms of having an interactive experience. Virtual worlds being able to interact among other people. And, you know, the entertainment value, and you know, ability to, you know, express one's, you know, interest and like, and communicate in that way, is certainly very interesting.

I think it's a test case for, you know, what could potentially be the metaverse, which is I think is a big question mark now of what it's gonna look like, you know, how things are gonna operate, how certain companies are gonna be able to monetize within that. But Roblox is very interesting, especially in terms of the adoption from-- you know, from kids and now, you know, game developers which are able to monetize it through their audiences.

DAVE BRIGGS: Yeah, given all the uncertainty in the crypto space. How far off is monetization is-- of the Web3 space? And of course, to the metaverse as well?

STEPHEN GARDNER: I wish I had a good answer for that. If I did, you know, it'd be a nice crystal ball question be able to answer. But you know, I think it's-- I think it's decades long out. I think it's gonna be a long time before we're able to actually have-- you know, build out from, you know, the likes of Facebook or some of these other bigger companies.

But again, it's all about being driven off the blockchain, and the content creation and expression to the user, rather than some of these big companies like a Facebook where, you know, the Web 2.0 world is set with content and data. And then being able to, you know, value that and be able to, you know, sell that data.

So I think it's a big question mark. I wish-- I wish you had a better answer for you. But it's another reason why we like this space, in general, rather than picking an individual stock to think that, you know, the, you know, metaverse is gonna be a benefit to one name in particular.