Once considered a niche thematic, video games and e-sports exchange-traded funds (ETF) are emerging as front-runners for 2025, driven by AI-led innovation, evolving digital lifestyles and rising institutional capital flows.
Speaking to InvestorDaily, Anna Wu, cross-asset specialist at VanEck, said not only are generative AI tools reducing costly research and development processes and accelerating development timelines, widening margins for firms like Roblox and Konami Group, but gaming has moved well beyond “first-person shooter games” to become a broader media ecosystem.
“Gaming has become more than the first-person shooter games played in the privacy of home. Competitive e-sports leagues and a growing library of fan content has turned gaming franchise into a mainstream media business,” Wu said.
Meanwhile, sovereign capital has entered the sector in a meaningful way, with Saudi Arabia’s sovereign wealth fund recently committing US$38 billion to e-sports investments, while big tech mergers and acquisitions are also helping fund innovation across the sector.
As to how broader market trends impact the industry, Wu said “history has shown the gaming and e-sports industry to be resilient in difficult markets”.
“Over the last decade, the sector (as represented by the MVIS Global Video Gaming & eSports Index) has outperformed the S&P 500 and the Nasdaq by over 400 per cent,” she said.
“The industry’s services-led revenue and lifestyle-driven audience have kept demand strong during uncertain economic conditions, with the exponential growth experienced in COVID-19 (the industry grew 106.82 per cent from June 2019–June 2021) a primary example.”
More recently, the sector has continued to show its strength since the US “Liberation Day”. Namely, after a brief 4.25 per cent drawdown post-“Liberation Day”, VanEck’s ESPO ETF regained all losses within a week and achieved a 14.14 per cent gain by 17 June.
“The one caveat is that, as a growth stock, the sector is inherently higher risk than other assets, and several factors continue to increase the equity risk premia, namely geopolitical tensions, stagflation risks and tariff uncertainty. While the sector has proven to be robust against macroeconomic pressure, it is not immune,” she said.
While retail investors continue to dominate flows into the ETF, VanEck, Wu said, has observed a rise in engagement from broker, adviser and wholesale investor channels, particularly those seeking diversified exposure to the AI thematic.
“Based on internal data, we can see that there’s a noticeable pick-up in interest from broker and adviser groups since early this year. More wholesale investors are also looking at this sector as a diversification play of the AI thematic,” she said.
Billy Leung, director at Global X, added that AI is also changing how games are developed, distributed and experienced.
He explained that while e-sports and video games remain compelling on their own, there’s a bigger story playing out – the rise of intelligent platforms, personalisation and digital engagement as investable themes.
“We’re seeing early signs of adaptive gameplay: NPC’s (non-player characters) that respond to player tone, storylines that evolve dynamically and in-game offers tailored to individual behaviour,” he said.
“This shift brings opportunity but also new competition. As barriers to entry fall, value is migrating from traditional publishers toward the infrastructure players enabling this evolution.”
Last year, the global games market, valued at an estimated US$187 billion, was projected to grow at a compound annual growth rate of 3.1 per cent to reach US$213.3 billion by 2027.
Speaking then, Alice Shen, portfolio manager at VanEck, said: “This sector of video games and e-sports is relatively new and it is an emerging trend in the investment landscape.”
Shen at the time also told InvestorDaily that a lower rate environment was likely to support US video game companies, which had experienced compressed valuations over the previous two years.
