The Metaverse is an immersive world where virtual reality, and augmented reality come together to create a virtual living space. In this there are virtual meetings, shopping, gigs, and even sports using VR headsets. The experts are talking about the many opportunities that will be available in the Metaverse, as a start there is a growing real estate business, with people selling and buying virtual land, and even Facebook has changed its name to Meta.
“The metaverse might sound futuristic, but the investment opportunities are here and now” Reid Menge, Co-Portfolio Manager of the BlackRock Technology Opportunities Fund says.
Technology stocks have been battered to start 2022. The key culprit: Investor concerns about how higher interest rates might impact these companies’ long-term cash flows. While rate fears may continue to drive volatility in technology shares, we are confident in the long-term value available across the sector. One area capturing attention: the metaverse.
What investment opportunities are available in the Metaverse? We have spoken to the experts
Hyun Ho Sohn – Portfolio manager of the Fidelity Funds Global Technology Fund
“The metaverse can make a difference“
The idea of the metaverse is not new. In 2003, Second Life promised a new way of living virtually, using avatars to socialize digitally. More recently, video games such as Fortnite and Roblox have created their own metaverses for online gamers and hosted virtual concerts featuring stars like Ariana Grande and Travis Scott.
Now the idea has grown. Facebook, which recently rebranded as Meta, is developing its version of the metaverse. The question is whether the site’s billions of users will embrace it. Facebook hopes that the pull of its metaverse will be the merging of the digital and physical worlds: the metaverse will be accessed via high-tech virtual or augmented reality (AR) headsets that project realistic, interactive images onto your physical surroundings.
The road ahead and supply chain implications
The potential of the metaverse may be impressive, but the technology needs to improve before it is widely adopted. AR headsets require enhanced computing power, battery life, projectors, etc. It will take time to develop them and there may be ethical concerns.
Tech hardware companies will be the first to go if big techs like Apple launch virtual reality (VR) headsets in the next two or three years. Suppliers of key components could be the first beneficiaries.
Companies that make 3D sensors could see their valuations improve as headsets become less reliant on cameras, while companies that make 3D graphics processors and AI engines could also attract more attention.
Software and apps will likely be developed in parallel to hardware and headsets, as products are adopted by a broader market. Companies delivering these services may be best placed to take advantage of the metaverse. Advertisers are likely to take advantage, and so are gaming platforms.
Asia could become a metaverse powerhouse
American companies are not alone in wanting to be part of the metaverse. Several Chinese companies including Tencent, Netease and Baidu are also embracing it. Tencent is a shareholder in Fortnite-creator Epic Games, which has its own 3D game engine and appears to be well positioned.
Meanwhile, a partnership of more than 400 Korean companies, including Samsung, have formed the Korea Metaverse Alliance. It is a technology company from the Asian country that already has 200 million users in the metaverse and 700.000 creators.
The metaverse can now make a difference
We believe that the metaverse can now make a difference. Although perhaps not right away: it takes time for the technology to evolve, for costs to come down, and the metaverse to move into the mainstream. Of course, it has already gained much more acceptance worldwide.
Focusing on the long term, moreover, it could have a huge impact on tech companies across the global technology supply chain, and eventually on the rest of the 2D economy. The metaverse is not the next internet, but the future of the current one.
Richard Lightbound, CEO for EMEA and Asia, ROBO Global
The rate of change to come from the introduction of the metaverse is truly unimaginable at this point. It heralds a far out, futuristic step for humanity – putting elements and innovation from numerous fields together. The sheer amount of data collected alone will be monumental – essentially all moments from all waking peoples’ lives that opt into using such a platform.
Maintaining sustainable cloud infrastructure, energy utilization, and efficient algorithms for data storage, communication and analysis will require further investment from both the tech giants and smaller innovators alike.
As the metaverse continues to take the world by storm, there’s no doubt that investors should be taking these early signals as a sign to tap into the growth opportunities early. One way to think of the metaverse is a visual, virtual twin created using AI to recreate our world, digitally, and create entirely new worlds, with applications across education, healthcare, entertainment and gaming, self-reflection and identity, manufacturing, and more.
With investing in disruptive technologies like the metaverse, AI, and robotics frequently comes questions regarding how to best capture the companies paving the path. For this reason, we believe that taking a broad and diversified investment approach to the foundational technologies and companies bringing the metaverse to life may be the best risk-adjusted way to capture the widespread adoption to come. Many of the companies in our portfolios have already been involved in the creation of the metaverse, both directly and indirectly, for many years.
Companies like Microsoft and Nvidia are responsible for building out metaverse platforms while companies like Autodesk, Dassault Systems, and PTC (all ROBO index companies) are supporting the development of fully virtualized products and production simulations to bring more sustainable, improved products to market in the real world and provide tools and technology utilized by corporations globally.
By taking an index-approach to investing in the metaverse, investors should also generally avoid the single stock rollercoaster ride, like that of the record-setting market loses of META seen on Feb. 3, 2022. We created our artificial intelligence index (ticker: THNQ) to capture to entire AI revolution and the metaverse is only further provide our investment case.
Read other Metaverse investment insights here.
