Video game stocks are primed to be the next hot trade for millennials, research firm says

• Data on investment from retail traders points to video game companies becoming the next hot trade, particularly for millennial investors, says VandaTrack.
• A surge in investment by retail traders has been seen in names including Roblox, Sea Ltd., and Nvidia.
• "While it's not 100% obvious that NVDA belongs to the gaming category...purchases of the stocks have risen inline with Roblox and Sea.," Vanda said in a note.

Video game companies are gaining popularity with retail investors, with the signal coming from a pickup in purchases in shares of game platform Roblox, among other names, according to VandaTrack.

In a weekly update, VandaTrack, which monitors trading activity by US retail investors, said Roblox has seen a surge in retail investment since releasing its first-quarter financial report earlier in May. The popular gaming platform in its first financial report since its shares started publicly trading in March, posted a wider per-share loss than a year earlier. But the stock soared on the report as Wall Street regarded Roblox's overall statement as better than anticipated.

Positive sentiment has fed through to Sea Ltd., a video game and e-commerce company based in Singapore, and Nvidia, which makes gaming graphics cards, said VandaTrack. Platforms Super League Gaming and Skillz are also candidates for another round of increased attention from retail investors.

"The personal attachment that millennial investors have with these companies makes them prime candidates to benefit from future purchases. Retail investors bought them late in the game (when the retail bubble exploded in February), so we think there is a high likelihood that they will revisit this opportunity," wrote Ben Onatibia, a macro strategist at Vanda.

It's "not 100% obvious" that Nvidia belongs to the video game category, as the case can be made that it falls into semiconductors or hardware, but retail purchases of the company's shares have risen in line with Roblox and Sea, Vanda said. Retail investors flocked to Nvidia after the company said it would enact a 4-to-1 stock split, effective in July.

Nvidia is set to release first-quarter earnings late Wednesday.