Advanced Micro Devices (AMD) and Microsoft (MSFT) announced a new partnership on Tuesday that is designed to increase performance for games running on Xbox consoles. A new video on the AMD Gaming YouTube channel revealed that AMD FSR 4.1 upscaling technology is being developed to work on Xbox devices. Today's news sent AMD stock 1.03% higher and MSFT stock 0.29% lower.

The first Xbox device that will see FSR 4.1 upscaling added is the Xbox Ally handheld. This is a handheld gaming PC that was made via a collaboration between Xbox and ASUS (ASUUY). This device uses ASUS' Ally handheld gaming platform as a base to create an Xbox handheld to appeal to gamers on the move.

AMD and Microsoft noted that the introduction of FSR 4.1 upscaling doesn't stop at the Xbox Ally. The two companies are also working to bring the technology to the Xbox Series X|S line of home video game consoles. This will provide better performance and visuals to players without the need for a hardware upgrade.

The addition of FSR 4.1 to Xbox consoles should extend the life of these devices, allowing them to remain competitive as technology advances create more powerful hardware. That's important considering the negative effect the AI boom has had on the home console video game market.

The increased demand for computer components for AI data centers has created supply constraints that have led to increased console prices. There's even talk that Microsoft and Sony (SONY) may have to delay their next-generation console launches due to these supply constraints.

PlayStation Also Bets on AI Upscaling

PlayStation has also been developing its own upscaling technology reliant on AI. The company introduced this as PlayStation Spectral Super Resolution (PSSR) on PlayStation 5 Pro. However, hardware limitations have kept this from being added to the base PlayStation 5.

That changed earlier this month, when PlayStation announced that Quick Spectral Super Resolution (QSSR) will come to the PS5. While QSSR isn't as powerful as PSSR, it will offer benefits to PS5 owners. Among them are a "streamlined neural network architecture" and "hand-tuned implementation that maximizes performance on PS5."

AMD vs. MSFT vs. SONY: Which Tech Stock Should Investors Bet On?

Turning to the TipRanks stock comparison tool, traders can compare these three tech stocks. Both AMD and MSFT shares have a consensus Strong Buy rating, while SONY has a Moderate Buy rating. AMD offers the highest upside potential at 22.46%, followed by MSFT at 14.26%, while SONY has no average price target to compare. (See Video Game Stock Comparisons)