Google Just Upended The Video Gaming Market & It Sent This Chip Stock Soaring – Here’s Why

Google’s new service is a game-changer and the chipmaker it chose to power the platform’s graphics might surprise you.

Google (NASDAQ: GOOGL, GOOG) just sent a shockwave through the gaming industry.

On Tuesday, Google announced its plans to launch a new video game streaming service called Stadia. The new service will allow gamers to play high-end games without purchasing expensive consoles or computers, calling it a “game platform for everyone.”

Google’s move into the gaming space will completely upend how the sector operates now. Currently, gamers have to buy physical games or often have to wait, sometimes for hours, for games to download to their console or computer before they can play. With Stadia, someone could be watching a video of a game on YouTube and could click a “play now” button and be playing the game on whatever device they have within 5 seconds.

The company says that Stadia will eventually run on “any screen type,” but at launch will work on laptops, desktops, TVs, tablets, and phones.

“With Stadia, the data center is your platform,” Google said, while also noting that a player can start a game on one device and pick up wherever they left off on another device.

Google will sell a special Stadia controller, but said that players will also be able to play with a  keyboard and mouse. Players will also have the ability to cast their games to YouTube so others can watch them play and gamers will have the ability to access the microphone for speaking for in-game features via a Google Assistant button.

Stadia will go head-to-head with console and platform giants Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE), and will need to recruit game studios to build titles for it. But Google already has id Software building “Doom Eternal” for Stadia and the game was demoed as part of the presentation for the new platform.

When Google unveiled the new platform, they also confirmed that chipmaker Advanced Micro Devices (NASDAQ: AMD) had won a deal to help power Stadia’s graphics rendering in the cloud.

After the news broke, AMD shares spiked nearly 12% higher on Tuesday, and shares are currently up 22% for the week, with the rally pushing the chipmaker’s market cap to just over $28 billion.

Partnering with Google to power Stadia’s graphics rendering in the cloud marks a big win for AMD in the gaming space, where it competes with Nvidia (NASDAQ: NVDA) on graphics chips. 

Jeffries analyst Mark Lapacis says the presence of AMD’s Lisa Su at Google’s developer’s conference may be a clue that a stronger bond between the two companies could be forthcoming.

Lapacis noted that the “conspicuous absence of Intel (NASDAQ: INTC) from the announcement suggests a close relationship between AMD and Google and the increasing likelihood that Google will ultimately announce that it will use AMD EPYC 2 server MPUs.”

Such a deal between Google and AMD on servers would be far more important than the GPU announcement for gaming as it represents a $25 billion per year market, according to Lapacis.