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Today’s Featured Topic

Video Games: The Future of Gaming Promises High-Speed, Low-Latency, and Quantum Clouds

Summary: Video Games have become the most popular form of entertainment on Earth with a dedicated userbase of between 300 and 400 million worldwide, and with casual gamers are included, the total consumer base is in the billions. As a result, the industry has become woven into the destiny of the most transformative technologies on the planet from 5G, to the Cloud, Quantum computing, and beyond. Here, MRP evaluates Video Gaming’s role in the future of such advancements.

Cloud Computing

MRP has previously covered cloud computing applications in video games. It would not be a stretch to say that the cloud is the launchpad that most other technological advancements in the video game industry are reliant on. 

Sony’s Playstation currently offers a PlayStation Now streaming service for a monthly subscription fee, and Nvidia has followed suit with GeForce NOW, a free to use streaming service because the company is still testing the service. Microsoft has also recently announced their latest streaming drive, Xbox All Access, a new plan that includes subscriptions to Xbox Live Gold and Xbox Game Pass, bundled with Xbox One hardware, for a discounted monthly fee. However, some reports suggest the company is building an even more advanced cloud-based game console with enough local computing power for “specific tasks like controller input, image processing, and importantly, collision detection.” Effectively, the console would render part of the game on its own, and the rest in the cloud, thereby reducing latency, the time between a digital command and response, while still costing far less than a traditional Xbox.

Parsec is one of a handful of smaller companies trying to make real cloud gaming happen and likely setting a roadmap for larger companies to follow by providing a low-latency, 60 frames per second interactive game streaming service that allows PC gamers to play their games remotely on multiple devices. The Parsec cloud gaming service is similar in some ways to Shadow, which allows gamers to rent access to a more powerful computer via the PCs they own. Although, whereas Shadow has built its own data center infrastructure, Parsec operates on Amazon Web Services. Like Shadow, Parsec Nvidia’s GPUs to deliver compelling graphics albeit those GPUs are offered via AWS.

Jeffries predicts that, by 2020, 75% of new console games will be downloaded, versus under 40% today. That will push margins even higher—an estimated three percentage points of gross-margin increase for each 10 percentage points of added download penetration.

It is also worthy of note that this is not the cloud’s first go at gaming. A service called OnLive promised to free gamers from pricey hardware back in 2010, but it failed to reach escape velocity. But plenty has changed since then. Huge cloud vendors have pushed computing costs lower, brick-and-mortar videogame stores have fallen into decline, and stream-based companies like Netflix and Spotify Technology have demonstrated the appeal of monthly subscription services for media. Meanwhile game makers have developed a fondness for digital revenue from things like in-game purchases to smooth out lulls between big game launches. OnLive was an insurgent taking on powerful incumbents, whereas Electronic Arts is an industry heavyweight.

5G, Low-Latency

Analysts expect EA to introduce a subscription-based cloud service for playing AAA games within two to three years. That will correspond with the rise of fifth-generation cellular service, or 5G, which will begin rolling out later this year as fixed broadband connections and next year as mobile broadband. It will not only increase data speeds, but also reduce latency, including on mobile devices.

Because every command from your controller or keyboard must travel to the internet, and every frame of video must travel back in the opposite direction, there’s always a small but noticeable delay between hitting a button and seeing the result on the screen when gaming on the cloud. Reducing latency, therefore, is hugely important for video games that will operate on the cloud, as everything from button presses to environmental and non-player character (NPC) responses all have to happen instantaneously. However, in the 5G future, we could see this obstacle evaporate.

In June, Verizon and Nokia took a huge step toward this by transmitting interactive VR sessions and simultaneous 4K streaming video on the network’s 28 GHz millimeter wave spectrum with latencies of just 1.5 milliseconds. For context, this is nearly seven times faster than 4G’s latency (10 milliseconds), the current standard. Telecom companies across the board are racing to reach the sub 1 millisecond holy grail of low-latency.

5G is also likely to make virtual reality less cost-prohibitive. When complex computing can be rerouted to the cloud (thanks to faster connections), it takes that stress of home devices, thereby making them more widely available at lower price points. 5G will also change how immersive augmented reality experiences can be, making AR creatures within games smarter and better able to interact with the gamer’s real-time environment—all with zero lag time.

Quantum/Artificial Intelligence

While the current state of video games on quantum computers is little more than random number generation, quantum’s potential in video games will likely be realized as an accessory, applied via the cloud, and could be realized much sooner than expected.

Even many decades from now, classical computers would likely still perform a video game’s grunt work, like the sound, dialogue, graphics, controls, etc. However, they would connect with a quantum processor that could introduce new game mechanics or improve the physics engine. But the most hyped quantum computing goal is better machine learning and artificial intelligence. Microsoft has said Quantum machine learning “will give game developers an opportunity to create experiences that adapt to human input over time. In massively multiplayer scenarios, quantum-powered machine learning will be able to analyze the behaviors of legions of gamers, and create experiences that challenge us better collectively, while adapting to each player’s unique style of play… In a world where truly random behaviors can be informed by quantum processes, we can create environments, and scores of enemies, that feel natural in their behaviors even over infinite periods of play.”

Further, breakthroughs in quantum applications will continue becoming easier as companies like Google and IBM continue to allow classical computers access to their quantum units via the cloud. Rigetti Computing, the holder of the world’s most powerful quantum processor, for example, has just taken the wraps off their new Quantum Cloud Service (QCS). The firm says that over the next few months, quantum algorithms will run 20 to 50 times faster on its QCS than on its current cloud setup, and significantly faster beyond that.

While this kind of technology is primarily used for research now, similar offerings will likely become available to game developers in the near future seeking to optimize the realism and difficulty of their products.

MRP added Long Video Gaming to our list of themes on October 19, 2017. Since then, the Video Game ETF (GAMR) has generated a return of about 2.5% vs the S&P 500’s 14% return over that same time period. Video Gaming has taken a hit as of late, due to financial turbulence in a couple of the larger companies in the sector, however, it has not disrupted the longer term fundamental transformations MRP is anticipating in the sector. Investors can also gain access to 5G and Cloud Computing via the iShares US Telecommunications ETF (IYZ) and First Trust Cloud Computing ETF (SKYY).

We’ve also summarized the following articles related to this topic in the Technology section of today’s report.

  • Video Games: Nvidia, Sony, and Others Promise a New Era of Cloud Gaming. Here’s What Their Services Are Like
  • Video Games: What Will Quantum Computer Games Be Like?
  • Video Games: Microsoft is the right company to build the “Netflix of gaming”
  • Video Games: Parsec puts life into cloud gaming with Party Finder
  • Quantum: Running quantum algorithms in the cloud just got a lot faster


Chart: Video Games (GAMR) vs Telecoms (IYZ) vs Cloud Computing (SKYY)


Other Disruptive Change

Economics & Trade

  • China: China’s inflation hits six-month high, but trade war not to blame
  • Growth: OECD Leading Indicators Flash Growth Warning
  • India: Once-in-a-Lifetime Dealmaking Spree Underway in India


  • Cryptocurrencies: Citigroup Planning Crypto Trading by Issuing Receipts


  • Cannabis: Apple Store Of Weed Poised To Expand As Tobacco Giant Eyes Cannabis
  • F&B: Can plant-based and lab-grown meat change the world?


  • 3DP: HP Metal Jet Launches At IMTS 2018
  • Robotics & Automation: New Space Robots Will Fix Satellites, or Maybe Destroy Them
  • 5G: Could 5G be the key to unlocking autonomy in deep mines?


  •  THEME ALERT Autos: Trump threatens Canada ‘ruination’ on autos


  •  THEME ALERT Oil: Oil Rises as Supply Crunch Fears Counter Trade Tariff Threats
  •  THEME ALERT Oil: The Downside For Oil Is Limited


  • End Note: Goldman Bear-Market Risk Indicator at Highest Since 1969


Joe Mac’s Market Viewpoint





U.S. Markets at Midyear

The U.S. capital markets had a challenging time in the first half of 2018. While the brouhaha about trade wars has been cited by experts as the cause of this year’s rise in volatility, MRP believes otherwise. Extended valuations, investor sentiment, portfolio leverage, an ageing bull market, inflation, and a Fed tightening cycle are all headwinds. In short, several large forces are at play and they will continue to pressure both equity and bond prices in the second half of this year.

Joe Mac’s Market Viewpoint: U.S. Markets at Midyear 


Other Viewpoint Reports

Joe Mac’s Market Viewpoint: CAPEX Booms! 

Joe Mac’s Market Viewpoint: The Inflation Complication 

Joe Mac’s Market Viewpoint: A Review of MRP Themes 

Joe Mac’s Market Viewpoint: The Coming Value Rotation 


Current MRP Themes






Autos (S)


Electric Utilities (L)






Long-Dated UST (S)


Defense  (L)


Industrials (L)




Materials (L)


U.S. Financials & Regional Banks (L)


ASEAN Markets (L)




Oil & U.S. Energy (L)


France (L)


Greece (L)




Palladium (L)


U.S. Pharmaceuticals (S)


Gold & Gold Miners (L)




Robotics & Automation (L)


Video Gaming (L)


Lithium (L)




Steel (L)


Value Over Growth (L)


Solar (L)






Obesity (L)


Major Data Points







US Consumer Credit Beats Expectations

Consumer credit in the United States went up by USD 16.6 billion in July 2018, following a downwardly revised USD 8.5 billion gain in the previous month and above market expectations of a USD 13.0 billion rise. Revolving credit including credit card borrowing edged up USD 1.2 billion, compared with a USD 1.2 billion decline in June. Meantime, nonrevolving credit including loans for education and automobiles climbed by USD 15.4 billion, after rising by USD 9.6 billion in the prior month. TE



UK GDP Growth Highest Since August 2017

The UK economy expanded on average by 0.6 percent during the three months to July of 2018, following a 0.4 percent growth in the April to June period. It was the highest growth rate since the three months to August of 2017. Both retail sales and construction grew strongly, boosted by warm weather and the World Cup. On the other hand, manufacturing continued to contract and energy generation and supply fell due to reduced demand. TE




Pound Climbs to Highest in Over a Month

The British pound jumped 0.9% to $1.304 around 2:25 PM London time on Monday, its highest level since August 1st, after EU’s chief negotiator Michel Barnier said a Brexit deal with the UK is “realistic” within six to eight weeks. TE


Other Disruptive Change





Economics & Trade

China: China’s inflation hits six-month high, but trade war not to blame

China’s consumer inflation rose to a six-month high last month due to higher food prices brought on by bad weather and an outbreak of swine flu, but the figures showed little direct impact from the trade war with the United States. A further sharp rise was unlikely unless the swine flu situation worsened considerably, analysts said. The national consumer price index accelerated to 2.3 per cent in August from 2.1 per cent in July, the National Bureau of Statistics said on Monday.

Food prices were the main driver of the increase, rising 1.7 per cent from a year earlier, and much faster than the 0.5 per cent gain a month earlier. Vegetable prices rose 4.3 per cent as supplies were disrupted by the effect of heavy rains in Liaoning and Jilin provinces, and severe flooding in Shandong province.

Rising oil prices continued to put upwards pressure on the index in August. Petrol prices rose 19.8 per cent from a year earlier while diesel fuel prices jumped 22 per cent, as a weaker yuan raised the price of US dollar-denominated oil and oil product imports.

Chinese core inflation, which excludes volatile food and energy prices, increased 2 per cent in August, 0.1 percentage points higher than July, government data showed. SCMP


Growth: OECD Leading Indicators Flash Growth Warning

The world’s developed economies are set for a slowdown, although prospects for Asian giants China and India have brightened, according to leading indicators released Monday by the Organization for Economic Cooperation and Development. Economic growth in the Paris-based research body’s 35 members accelerated in the three months through June after a weak start to the year, thanks to a surge in U.S. activity that was partly driven by tax cuts and government spending increases.

However, the OECD’s gauges of future activity, based on data for July, suggests growth is set to steady in the U.S. and Japan, while slowing in Europe. In July, the CLI for the OECD fell further below the 100.00 mark that indicates growth is set for its long-term trend rate. The measure had been above that mark until April, and before May last fell below that level in August 2015.

The global economy last year enjoyed its strongest expansion since 2011, and is expected to slow only slightly this year. An August measure of global activity in the manufacturing and services sectors compiled by data firm IHS Markit fell to its lowest level since March. The OECD’s indicators suggest that slowdown may continue into 2019, although they also pointed to accelerations in China and India that could be strong enough to offset a mild deceleration in rich countries. WSJ


India: Once-in-a-Lifetime Dealmaking Spree Underway in India

The biggest mergers-and-acquisitions boom in Indian history has investment bankers preparing for even more dealmaking to come. Transactions involving Indian companies have reached $104.5 billion in 2018, trouncing the previous annual record with almost four months left in the year, according to data compiled by Bloomberg. The tally may surpass $100 billion again in 2019.

The combination of a new bankruptcy law, a race for dominance in the e-commerce industry and a record war chest at Asia-focused private equity funds has created what some are calling an unprecedented opportunity for dealmaking in the world’s fastest-growing major economy. The burst of activity is not only good news for investment bankers, it’s also helping to rid the Indian financial system of bad debt and modernize a retail sector that serves 1.3 billion people.

However, a sustained dealmaking boom is far from guaranteed. India’s rupee has slumped to an all-time low amid an investor exodus from emerging markets. For now though, the pipeline for Indian deals looks strong. U.K. pharmaceutical giant GlaxoSmithKline Plc has requested bids by mid-September for a controlling stake in its $4.2 billion Indian consumer-health unit. Meanwhile, Asian private-equity funds are flush with cash and looking for opportunities. They had a record $225 billion available to deploy at the end of 2017. B




Cryptocurrencies: Citigroup Planning Crypto Trading by Issuing Receipts

Citigroup Inc. is developing a new mechanism for trading cryptocurrencies such as Bitcoin that would put it at the forefront of Wall Street’s efforts to let clients bet on the largely unregulated market. The bank plans to act as an agent issuing so-called digital asset receipts, or DARs, to enable trading by proxy without direct ownership of the underlying coins. The structure is designed to fall within existing regulatory regimes, giving investors a relatively safe method of trading in crypto. The DARs would function similarly to American depositary receipts, or ADRs, which are sometimes used to trade baskets of non-U.S. stocks. The cryptocurrencies would be held by a separate custodian.

It’s unclear how U.S. regulators would view DARs. The Securities and Exchange Commission has taken a cautious approach toward virtual currency-linked securities, shooting down several proposals for crypto-themed exchange-traded funds.

Banks have struggled to offer direct trading in Bitcoin because of the difficulties of acting as custodians of digital assets, which are notoriously susceptible to theft from hackers. Citigroup drafted a proposal that identifies three legs to make this type of trading work. Certain firms would buy Bitcoin and deposit it with a custodian of their choice. The bank would then issue receipts to those firms, who could trade the instruments with brokers. That would allow other investors to dabble in Bitcoin by buying and selling the receipts. B




Cannabis: Apple Store Of Weed Poised To Expand As Tobacco Giant Eyes Cannabis

U.S. cannabis retailer and cultivator MedMen reached a deal with Canadian investors to raise $57 million in financing and snapped up “prime retail locations” in Florida, capping a wild week for marijuana stocks. Under the so-called “bought deal,” announced late Thursday, the Canadian investment companies — Eight Capital, Cormark Securities, along with a group of underwriters — agreed to buy around 13.6 million units of MedMen at a price of 5.50 Canadian dollars ($4.17).

MedMen said it will use the money to add more retail locations to “attractive cannabis markets” and build out its cultivation and production resources. MedMen has also agreed to allow the underwriters an option to buy up to an extra 15% of the units at that price. If the underwriters exercise that option in full, MedMen would raise some 11.25 million Canadian dollars extra, or around $8.5 million.

The MedMen deal announced Thursday follows other big financial infusions in the marijuana industry. Hedge fund billionaire Leon Cooperman this year invested in the cannabis cultivator Green Thumb Industries, its founder said last week. Earlier last month, Corona parent Constellation Brands (STZ) said it would invest nearly $4 billion in Canadian pot producer Canopy Growth. In July, Acreage Holdings, a company backed by former House Speaker John Boehner and former Massachusetts Gov. Bill Weld, said it received $119 million in new funding. IBD


F&B: Can plant-based and lab-grown meat change the world?

According to statistics presented by Isaac Emery, senior environmental scientist at the Good Food Institute, about a fifth of the emissions that contribute to climate change are from animal agriculture. The total biomass of cows currently produced for food are more than 10 times heavier than every other land vertebrate put together. But it isn’t just cows — pigs also outweigh everything by a factor of two.

Scott Faber, vice president for government affairs at the Environmental Working Group, advanced the dire news. If everyone in the world suddenly starts doing right in terms of resource consumption, but continues to raise meat and dairy animals in the same way — and demand spikes 60% to 70% with population growth and more people wanting those products — then the world is headed for a climate catastrophe, he said.

One of Impossible Foods’ core tenets is solving this seemingly impossible problem. Brown said his goal is to eliminate the current system of raising animals for food by 2035. What the food industry needs to do, Impossible Foods co-founder and CEO Pat Brown said, is produce what consumers want in a more sustainable way because consumer behavior is unlikely to change. “Give them meat, give them milk, give them fish,” he said. “Just make it directly from plants and they can think whatever the hell they want.” FDive


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