Some of the best cloud gaming stocks seem to be in correction territory after the latest barrage of summer selling. Indeed, cloud gaming may still be in its infancy, with numerous firms still ironing out the stubborn wrinkles in the technology. Most notably, latency remains a big issue that’s been tough to tackle.
While Google — whose parent company is Alphabet (NASDAQ:GOOG, GOOGL) — may have shut down its Google Stadia game streaming service around a year and a half ago, I still think it’s a mistake to deem cloud gaming itself dead.
Stadia was undoubtedly ahead of its time. However, the big question was whether the niche gaming service was two to three years too early or closer to a decade too early. The issues preventing cloud gaming from going mainstream are difficult to solve but not impossible.
Given the massive total addressable market for a next-generation cloud gaming service indistinguishable from gaming on PC or console, I’d argue that the niche industry is still worth monitoring as firms look to advance the technology in the post-Stadia era.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) seems to be leaving its rivals in the dust regarding the cloud. Undoubtedly, the company’s latest quarter saw more strength from Intelligent Cloud. Looking ahead, I continue to view Microsoft as a share taker and fast mover in the public cloud as it gives artificial intelligence (AI) everything it’s got. Indeed, Azure is tough to top in this AI era.
Given its dominance in AI (think Copilot and its stake in OpenAI), the cloud (via Azure) and video gaming (via Xbox), I’d argue that Microsoft is one of the best cloud gaming stocks to own. While it could take some time for Xbox Cloud Gaming, which is still in beta, to be the preferred way to play, it’s just a matter of time before Microsoft succeeds, whereas Stadia has failed.
As it stands, Xbox Cloud Gaming is nowhere close to taking off. However, after a few years, a few updates and perhaps some AI-driven enhancements, Microsoft’s cloud may grow to become the future of gaming.
Alphabet (GOOG, GOOGL)
After it pulled the plug on Google Stadia more than a year ago, Alphabet seems to be out of the game streaming market. Indeed, the company had spent much money attempting to disrupt the video gaming market. With muted success in its early days, it didn’t make as much sense to keep pouring money into the money-losing effort, especially as rates crept higher.
For now, it seems like Alphabet has hit the pause button on game streaming. However, the firm may still get some salvage value out of Stadia as Google looks to play the role of support. Notably, Google is an attractive partner for firms seeking to put their live-service games out there.
Because Google failed to achieve the holy grail of game streaming, it can’t continue helping others advance the effort. Who knows? Perhaps once game streaming is ready for prime time, the firm will return with a new game streaming service that picks up where Stadia left off.
Google’s “Playables” service on YouTube is intriguing and could be a baby step towards advancing game streaming at a slower and steadier pace.
Amazon (AMZN)
Finally, we have e-commerce and cloud behemoth Amazon (NASDAQ:AMZN), which has its Luna game streaming subscription service. For now, Luna is a niche service aimed at casual gamers who want to play console-quality games without investing in expensive hardware.
Indeed, Luna remains a relative underdog compared to Nvidia’s (NASDAQ:NVDA) Geforce Now. However, I do like the convenience factor for users already in the Amazon ecosystem.
Apart from lag and buffer issues plaguing other rivals in game streaming, Luna also seems to have a relative lack of new hit titles. This problem is easily solvable, especially if Amazon were to launch a blockbuster hit under Amazon Games.
With a solid foundation in place (think Twitch and Fire device integration), Luna may have all the building blocks to build out the cloud gaming service of the future.
On the date of publication, Joey Frenette held a long position at Amazon and Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.