With its foray into online gaming, Google will join Microsoft, Sony and Nintendo in a $140B industry
Shares of AMD (AMD) are on the rise after Google (GOOG; GOOGL) announced "Stadia," its new streaming, cloud-based gaming service, at the 2019 Game Developers Conference. During the presentation, the tech giant also confirmed the partnership with AMD, which will power Stadia's graphics rendering in the cloud.
GOOGLE UNVEILS STADIA: At the 2019 Game Developers Conference in San Francisco, Google's Phil Harrison unveiled Stadia, a video game-based platform powered by Google that creates "one place for all the ways we play." Harrison said that Stadia is meant to connect game developers and players with YouTube creators, creating a "richer and more vibrant" gaming community for "everyone to enjoy." The Stadia platform will be able to work on any screen, including desktops, laptops, TVs, tablets, and phones. As part of its Stadia announcement, Google announced the Stadia controller, a video game controller that connects through Wi-Fi to devices and screens that are playing games through Stadia. The device will use the cloud to allow shifting between streams of the same game. The controller includes two new buttons, including a save experience button and the Google Assistant button, which allows players to immediately access the controller's built-in microphone to get help or info. The tech giant also noted that the Netflix (NFLX)-like product will be able to stream in up to 8K resolution and at over 120 frames per second in the future, and hold simultaneous streams in up to 4K resolution. Google added that Stadia graphical capabilities surpass Xbox One X (MSFT) and PS4 Pro (SNE). Saying Stadia will include full cross-platform multiplayer, Google unveiled StreamConnect, which will make it possible to create split-screen multiplayer without making sacrifices to visual fidelity while playing games on Stadia. Phil Harrison added that Stadia is expected to launch in 2019, first in the U.S., Canada, U.K., and Europe. The tech giant also confirmed its partnership with AMD, which created the card for integration with its Stadia "instances," the Linux-based computers that will actually run the games players stream.
RADEON GPUS USED FOR STADIA: Following Google's announcement, AMD said the tech giant selected custom AMD Radeon datacenter GPUs for its Vulkan and Linux-based Stadia. The chip maker is also supporting Google with its software development tools and Linux-based, open-source Vulkan driver to "help game developers optimize future titles to run on the new GPU-powered platform," the company stated. "By combining our gaming DNA and datacenter technology leadership with a long-standing commitment to open platforms, AMD provides unique technologies and expertise to enable world-class cloud gaming experiences. AMD is delighted to work with Google in its effort to bring amazing gaming experiences to legions of gamers around the world with the reliability and no-compromises performance they expect," said Ogi Brkic, corporate VP and general manager of the Datacenter GPU Business Unit at AMD.
AMD CLOUD WINS: In a research note to investors prior to Google's announcement, Morgan Stanley analyst Joseph Moore said he sees cloud gaming as a "very significant initiative," as both consoles and PC gaming migrate toward higher use of cloud to supplement local hardware and expand the total addressable market. The analyst continues to expect good opportunities for client GPU hardware, for games that require minimum latency, but for less reflex-oriented games he expects that cloud-based graphics chips can provide visually rich experiences, given adequate network capability. Even games that would be optimized around the minimum latency in a competitive eSports environment could move to the cloud for more casual players, he contended. However, Moore highlighted that the "surprise" is that AMD has had success despite a "less competitive graphics portfolio." AMD has been successful in mid-range graphics, but has struggled to compete at the high end, he added. Nonetheless, the company is working with Google and the reason seems to be the way that AMD has implemented cloud gaming virtualization. AMD graphics chips are built with a hardware virtualization scheduler to maintain a consistent commitment of a portion of the hardware to each user, versus Nvidia (NVDA), which uses a software layer to determine those connections, he pointed out, adding that AMD's methodology offers better security, and lower latency, all else being equal, which has helped it to find favor with cloud providers despite GPU performance that lags Nvidia. While the pace of deployment "remains a debate," the analyst believes this seems like a "material positive" in a market where AMD has largely abdicated its position in gaming oriented graphics. However, Moore still expects this market to remain a major focus for Nvidia as well, and reiterated an Underweight rating and a $17 price target on AMD's shares.
PRICE ACTION: In afternoon trading, AMD's stock has jumped about 11% to $25.96, while Class A shares of Alphabet have gained over 1% to $1,202.08. Shares of several video game makers also rose following the Stadia announcement, with Activision Blizzard (ATVI) up 3%, Take-Two (TTWO) 2% higher, and Ubisoft (UBSFY) up 1% in New York
This story has been updated to reflect Google's announcement of details of its upcoming service.