How to Play the Boom In Video Game Stocks

Douglas Creutz winced when news of Electronic Arts Inc.’s $55 billion acquisition landed in his inbox. For the TD Cowen equity analyst, the largest leveraged buyout in history meant losing one of Wall Street’s clearest windows into the $400 billion video game industry. In the worst case, “investors might say, ‘Jeez, I’d rather spend my time in an industry where there’s more major names to choose from,’ ” he says.

EA’s privatization, announced in September, marks a watershed for the sector, one that could either extend gaming’s remarkable stock rally or reveal its limits. From Wall Street to Kabutochō, Japan’s equivalent, video game shares have scaled new heights this year, extending their ­pandemic-fueled rally on excitement about Nintendo Co.’s Switch 2 console and Take-Two Interactive Software Inc.’s upcoming Grand Theft Auto VI.