Nvidia just made a smart move that could supercharge its gaming business

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Nvidiaof (NVDA -1.28%) After two solid years of growth in 2020 and 2021, the video gaming business has been in a bad state over the past year as demand for graphics cards used in personal computers (PCs) has fallen sharply. However, there is an emerging niche within the gaming business where the company is doubling down despite headwinds in this segment.

The chipmaker recently announced that it is bringing its RTX 4080 graphics cards to GeForce Now – Nvidia’s cloud gaming service. Let’s see why this could be a big deal for the company in the long run.

Nvidia is pushing the envelope in cloud gaming

The RTX 4080 is one of Nvidia’s best graphics cards that brings a huge improvement over its predecessor the RTX 3080. Gamers can now stream titles powered by the RTX 4080 to their devices and play high-end games without the hassle. Having to invest in expensive hardware. This is because cloud gaming enables gamers to stream games to their local devices — which can be a PC, smartphone or a television (TV) — over the Internet while the processing is done by a remotely located data center.

Now that Nvidia is equipping its cloud gaming servers with RTX 4080 graphics cards, gamers can stream and play resource-intensive games even on their underpowered devices. The company is promising that its RTX 4080 class cloud gaming servers can deliver five times the graphics performance. Microsoft1.75x the performance of its Xbox Series X console and previous generation RTX 3080 class cloud gaming servers.

What’s more, Nvidia says that GeForce Now customers opting for an RTX 4080-class membership will experience “true PC gaming – streaming from the cloud at up to 240 frames per second with full ray tracing and DLSS 3.” This will be a big bump on the RTX 3080-class GeForce Now membership tier that delivers games at 120 frames per second on PCs and MacBooks.

Nvidia is offering RTX 4080 class cloud gaming with the GeForce Now Ultimate membership tier, priced at $19.99 for a monthly subscription and $99.99 for a six-month subscription. An RTX 4080 graphics card alone starts at $1,199, so gamers looking to play high-end titles without breaking the bank.

So, it’s no surprise to see more cloud gamers flocking to GeForce Now after Nvidia’s latest move, especially at a time when high inflation and the possibility of a recession could further hurt physical graphics card sales. A cloud gaming subscription is cheap enough to play in Nvidia’s favor.

It’s also worth noting that the company had 12 million GeForce Now subscribers before the previous-generation RTX 3080-class cloud gaming subscription launched in October 2021. That number grew to 20 million within a year — a 66% increase — when the RTX 3080 membership tier launched in August 2022. And now that Nvidia is pushing the envelope even further by upgrading its cloud gaming performance, don’t be surprised to see the company supercharge its long-term growth to maintain great growth in this fast-growing niche.

Investors should also note that gamers can subscribe to GeForce Now starting at $9.99 per month for the Priority membership level or $49.99 for six months. There are limitations, however, as Priority Level limits game streaming to 1080p resolution and a frame rate of 60 frames per second. Moreover, Nvidia is offering a huge library of 1,500 games on GeForce Now, which gives gamers another big reason to go for the service.

It can become a huge business

It is estimated that the global cloud gaming market generated a revenue of just over $2.4 billion last year. That’s a whopping 74% increase over 2021, according to projections from video games and esports analytics and market research provider Newzoo. The firm also noted that the cloud gaming market had an estimated 31.7 million paying customers by the end of 2022.

If this is indeed the case, Nvidia has already cornered a nice chunk of the market as it had 20 million GeForce Now customers in August last year. More specifically, Nvidia already controls over two-thirds of the cloud gaming space based on the size of its paying subscriber base, as estimated by Newsoo.

This puts the company in a great position to capitalize on cloud gaming, a space that is expected to clock a healthy annual growth rate of 47.5% through 2028 and generate nearly $14 billion in revenue by the end of the forecast period. Nvidia’s sustained dominance in this market could help the company rake in billions of dollars from cloud gaming.

To put things into perspective, Nvidia generated $7.2 billion in revenue from the gaming segment in the first three months of fiscal 2023, pointing to a $9.6 billion annual revenue run rate. So, cloud gaming could be a significant growth driver for Nvidia, given the potential end-market opportunities on offer and the dominant position the company has already built for itself.

All in all, it can be said that cloud gaming could bring a much-needed boost to Nvidia after a terrible year in graphics card sales. And that could finally help get this beaten-down tech stock back on track.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has locations and is recommended by Microsoft and Nvidia. Motley Fool has a revealing policy.


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