There is a new buzzword on Wall Street: metaverse stocks.
The metaverse has been a hot topic in recent months. And as stock prices of some companies linked to the metaverse continue to move higher, some already believe that we may be experiencing a bitcoin craze again.
Metaverse stocks are a new trend but traders are not entirely sure how long these companies will take to make their virtual-world dream a reality.
Usually, new and exciting stocks or financial instruments capture a lot of attention due to the awe factor associated with a fascinating new industry.
In this post, you’re going to know what the metaverse is and how it is intended to work. We are also going to discuss several stocks to watch closely as they are widely expected to benefit from the metaverse.
The majority of the companies working on the metaverse have their stocks listed on the Nasdaq stock market while a few trade on the NYSE.
What is the metaverse?
Financial news outlets and leaders in the technology industry keep talking about the metaverse.
Microsoft chief executive Satya Nadella says his company is working on a “metaverse stack” for the enterprise.
Mark Zuckerberg of Meta Platforms (formerly Facebook) recently changed the name of the company to Meta Platforms Inc to reflect with its plan of staking its future on the metaverse.
So, what is this thing and why is everyone talking about it?
The metaverse generally refers to the concept of a highly immersive virtual world, where users will be able to interact with other humans and objects in virtual worlds in a deeper, multisensory, richer way.
It encompasses technologies like augmented reality (AR), virtual reality (VR), artificial intelligence (AI), procedural image generation, cryptocurrencies, non-fungible tokens (NFTs), among a huge number of other developments.
In layman’s terms, the metaverse is a virtual reality world where you can go to work, go to school, browse store shelves, play games, watch concerts, and many other things without leaving your (physical) home.
The term metaverse was coined by science fiction author Neal Stephenson in his 1992 novel “Snow Crash.”
In the book, Stephenson envisioned lifelike avatars interacting in realistic 3D buildings and other VR environments.
Since he published the book, many tech brains have been working toward making his vision a reality by developing the metaverse.
How the metaverse works
The metaverse has been described as the next generation of the internet. But how is it intended to work?
For the uninitiated, understanding the ins and outs of the metaverse can be a bit complicated because we’re talking about something that doesn’t exist yet.
Contrary to what some people believe, the metaverse is not just augmented reality or virtual reality.
Rather, it is a combination of innovative technologies, including video, AR, and VR that are designed to help users live and interact within a digital universe.
Proponents of the metaverse picture users working, playing, and staying connected with friends through everything from conferences and concerts to virtual journeys around the world.
While building blocks of the metaverse currently exist, no one really knows what the reality will look like. According to Zuckerberg, it could take up to ten years before the key aspects of the metaverse become mainstream.
Tons of companies are pouring millions of dollars into the development of the metaverse. But it’s important to note that no single company can be the sole owner of the metaverse, just like how no one owns the Internet.
Nonetheless, a handful of companies may attempt to monopolize their respective territories of the metaverse, similarly to how a few tech firms dominate the Internet today.
Companies could achieve this just like how they make money off apps through ads, shopping carts, and subscription services.
5 metaverse stocks with big promise
As you might imagine, companies directly involved in the development of the metaverse are the likeliest to see their stock prices move higher in the coming months and years.
In this section, we will take a look at five stocks that could benefit immensely from the growing interest in the metaverse. Let’s go!
Meta Platforms Inc (NASDAQ: FB)
California-based Meta Platforms Inc is best known for its social media services, which include Facebook, Instagram, and WhatsApp.
The company was previously known as Facebook Inc, until Zuckerberg and his colleagues decided to change to Meta, to reflect their heightened focus on the metaverse.
Some analysts say that Zuckerberg likely realized his empire had maxed out its profitability from its social media offerings. He believes that most of the company’s future revenue is likely to come from new, untouched areas like the metaverse.
Meta has been investing heavily in AR and VR products such as Oculus, and has already started to spin off its Facebook Reality Labs hardware division.
While announcing the name change in October 2021, Zuckerberg revealed how the company expects the metaverse to look like. He showed a video of people connecting as avatars and getting transported to digital versions of different places and time periods.
But given Meta’s long list of past privacy issues, Zuckerberg also tried to assure the public that developers of the metaverse would need to build it with privacy and safety in mind.
With a mind-boggling 2.89 billion monthly active users as of the second quarter of 2021, Facebook looks well-positioned to go all-in on the metaverse.
Microsoft Corp (NASDAQ: MSFT)
Microsoft is another good option for individuals considering putting money in the metaverse.
The computing giant recently announced its intentions to jump into the metaverse bandwagon and revealed how the virtual world could change work presentations and video meetings.
In 2022, Microsoft plans to bring Mesh, a collaborative platform that allows users to have shared, virtual experiences directly into Microsoft Teams.
The move is part of a huge effort to combine the company’s HoloLens work and its mixed reality with video calls and meetings that anyone can take part in thanks to animated avatars.
Using Mesh, a user can beam a realistic likeness of himself into the headset of another user and it ends up feeling like they are connected inside the same room.
Microsoft also boasts more than 145 million daily active users (DAUs) on its Teams communications app that it can leverage for its metaverse goals. The company wants to enable metaverse apps for entertainment, business, training, and education.
All these are real-world needs, and the company can enhance and reinvent each of them with virtual reality, augmented reality, and avatars.
In May 2021, Microsoft told its shareholders that it is “uniquely positioned” with a host of AI and mixed reality tools that will help businesses to start creating metaverse apps today.
Nvidia (NASDAQ: NVDA)
The metaverse relies greatly on graphics computing technology offered by chipmakers like Nvidia.
Nvidia, a leading global manufacturer of GPUs and integrated circuit technologies, has ramped up its efforts to develop more products targeted at the metaverse.
The company aims to use its position in the semiconductor industry to provide the computing hardware needed to run metaverse components.
Over the past two decades, Nvidia has taken its GPUs from their original market in gaming personal computers to data centers, where they have become the main engines for data-intensive tasks of training AI systems.
Now, the company is betting on the growth of its data center businesses as more tech companies start to invest in the metaverse.
The development of the metaverse will be a huge boost for Nvidia since most of its components require more computing power and increase demand for GPUs.
Right now, Nvidia is working on a business tool called Omniverse that combines different types of simulation software into a single package. Nvidia already allows for example automakers such as Nio (NYSE: NIO), Volvo Car AB, and Daimler AG’s Mercedes-Benz to test vehicles using Omniverse.
Nvidia CEO Jensen Huang sees Omniverse becoming part of the wider metaverse, and possibly even determine how the metaverse will look. According to Huang, the metaverse will have a bigger economy with more active people compared to our physical world.
Nvidia forecasts strong earnings buoyed by metaverse hopes. Its shareholders have also caught up to its potential. Shares of the company surged 127% in 2021, making it the top-performing mega-cap technology stock last year.
Roblox Corp (NYSE: RBLX)
Roblox is also playing an essential role in the metaverse.
Founded as a gaming company in 2004, Roblox now runs a great creative platform that attracts users and creators who will certainly play a critical role in the creation of the metaverse.
The platform has about 47 million daily active users globally who explore millions of “experiences,” or users-created worlds or games.
And even though half of its users are children under the age of 13, Roblox has gained mainstream attention because of the way it allows users to create unique digital avatars of themselves that take on a consistent look.
Roblox users can program and create their own experiences where they socialize and interact with other users in a 3D world.
Its feature allowing users to create avatars of themselves within the Roblox universe is perfectly in line with metaverse goals.
Roblox’s concept of a virtual world is still in the early stages, but the company is one of the earliest players in the development of the metaverse.
Unity Software Inc (NYSE: U)
We can’t end this post without mentioning Unity Software, another stock that we believe may ultimately leap huge benefits if a virtual world where people live, work and play ends up being created.
The company made its stock market debut in 2020 and is also eyeing a piece of the metaverse. It has a platform for creating and operating games and 3D content.
In November 2021, the Silicon Valley firm revealed plans to buy VFX studio Weta Digital in a cash and stock deal worth over $1.62 billion.
The move is intended to boost Unity’s talent and toolset for 3D content creation as it prepares to jump into the metaverse realm.
Unity is not only a game development engine, but also a provider of tools that help developers to drive engagement, enhance game performance, and optimize applications with digital ads and in-app purchases.
Every month 1.5 billion devices download content made with Unity, and 1.5 billion developers use its platform. From the HoloLens to the Oculus, iOS to Android, Mac to PC to Xbox, the company has developers covered.
In a recent call with analysts, Unity CEO John Riccitiello said the company aims to have 60% to 80% of metaverse content created using its software.
The development of the metaverse could help push Unity’s growth prospects and share price to a higher level.
The metaverse has become one of the hottest topics on Wall Street and among Silicon Valley entrepreneurs seeking to capitalize on the growing amount of time people spend online and taking part in a virtual universe.
According to analysts polled by Bloomberg, the metaverse is likely to grow to an $800 billion market by 2024.
However, it is still in the earliest stages of development right now and there are numerous challenges to work through, particularly technology issues, as well as creating the right infrastructure.