Gaming Funds Fall From Apex as Vaccine Dims Screen Time’s Appeal

E-sports and video-game funds are testing key support levels in a sign the sector that ran hot during stay-at-home coronavirus orders and a cycle of new consoles has quickly cooled off.

Global X Management’s Video Games & Esports (HERO) exchange-traded fund has fallen 19% from its all-time high in February, and now sits below its 100-day moving average. Roundhill’s similar ETF (NERD) is nearing the technical line also. Both funds retreated Monday amid losses for some of the biggest names in the industry, including Take-Two Interactive Software Inc., Ubisoft Entertainment SA and Bilibili Inc.

The video-game sector is losing its charm after a holiday-season boost from titles tied to the newest Microsoft Corp. Xbox device and Sony Corp.’s nearly unattainable Playstation 5. The decline coincides with a broad sell-off in tech stocks, particularly the most speculative names, and reflects wagers that the end of pandemic-era lockdowns could damp the appeal of gaming.

“With more Americans becoming vaccinated and others gearing up to do so, investors think video gaming and e-sports will be less relevant during 2021 than in 2020,” said Todd Rosenbluth, who leads fund research at CFRA Research.

Gaming Funds Fall From Apex as Vaccine Dims Screen Time’s Appeal

Still, money flows to the ETFs suggest investors are willing to wait out the volatility after a swift run up. HERO has recorded inflows every month since the start of 2020, while NERD hasn’t seen a daily withdrawal since December.

Gaming Funds Fall From Apex as Vaccine Dims Screen Time’s Appeal

The video-game sector is particularly popular with mom-and-pop investors, and those types of traders have been piling into stocks as a growing cohort of the population sees equities as their best chance to create wealth from a market once viewed as designed only for the rich. Retail investors snapped up an average of $6.6 billion in U.S. equities in each of the past three weeks, according to data from VandaTrack, an ancillary of Vanda Research, which monitors market retail flows across the nation. That’s an increase from an average $4.7 billion last year.

Rosenbluth says that expectations for a sharp drop-off in gaming are flawed, and both funds are attractive at their current prices.

“We think these thematic ETFs continue to have appeal and expect consumer habits will not change significantly,” he added.

©2021 Bloomberg L.P.

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