There’s no skirting around it - the metaverse is poised to become the 21st century’s goldmine. There's plenty of money to be made with virtual goods and services, as well as NFTs, crypto - and, of course, good old stocks. And this is just for starters. Virtual world infrastructures have been valued as a trillion dollar opportunity, luring in investors who’re pumping vast amounts of money into all sorts of projects and companies involved in creating the technology necessary to support this new digital environment. Slowly but surely, the metaverse is emerging as the investing theme of the moment, despite the fact that a clear definition for it is yet to emerge. So, ok, it’s a still-evolving concept but it’s slowly materializing and becoming less the stuff of science fiction novels and more like reality (pun intended) - and metaverse stocks are riding the trend. There’s been a lot of hype energizing the market, so today we’re diving into the top metaverse stocks worth keeping an eye on in 2022.
Overview Of The Metaverse
The metaverse is widely seen as the next generation (or revolution, as some might argue) of the internet. Broadly speaking, it can be defined as a highly immersive virtual space where real-world and digital experiences converge into a single platform, enabling users to engage in a variety of social, entertainment, business and professional experiences.
Mark Zuckerberg has previously claimed that "the metaverse will not be created by one company," rather by “creators and developers making new experiences and digital items that are interoperable and unlock a massively larger creative economy than the one constrained by today's platforms and their policies.”
This goes to show that not one single company or entity will be responsible for building the metaverse. More importantly, creating a metaverse will demand technological performance from digital infrastructures and devices that are still under construction.
Worse yet, we might not even know how to build it. Again, that's Mark Zuckerberg giving his five cents.
Think about 5G, for example, whose rollout is crucial to creating metaverse-ready networks, reducing latency and massively improving connectivity. Currently, only less than a third of the world’s population has access to 5G networks making the prospect of the metaverse’s global reach a distant one for now. The metaverse is also driving upgrades across other tech, from edge computing to display hardware and machine learning.
Understanding the tech behind the metaverse and the applications supporting it is an important step in deciphering how money is flowing into and being allocated within this new segment of industry.
Investing In The Metaverse - Stock Sectors
Before we get to the stocks, let’s take a look at some of most relevant metaverse sectors that make up this new industry:
Devices/hardware
This is the key touchpoint between users and the metaverse, and the interface through which entering the metaverse is made possible. In this context, we could refer to smartphones (which enable limited interaction and immersion) and AR/VR devices, including headsets and haptic gloves. In the future, we might also see the emergence of dedicated hardware that better meets the needs of virtual worlds. This category further includes components up and down the assembly line, as well as connectors, batteries, optics, PCB substrate and more. Batteries in particular have posed a challenge to the long-term use of VR headsets and companies are looking to develop smaller and more potent batteries that would lead to lighter headsets, making it a more comfortable experience for users.
Semiconductors
Sustaining uninterrupted and persistent large-scale worlds requires immense computing power. Whether for real-time 3D rendering, minting tokens, operating deep learning models, creating, storing, analyzing or transmitting data, microchips are a key building block that allows virtual worlds to truly come to life.
Telecom/ networking / computing infrastructures
The metaverse relies on networks and devices that can connect the content of virtual platforms to hardware. Currently, this is supported by 5G networks, edge, spatial and cloud computing technology, among other tools, that allow systems to perform demanding tasks like synchronization, motion capture, AI rendering, near real-time data reconciliation, etc. Tied into this, there’s the issue of data usage, bandwidth consumption and internet traffic for which telecom companies have to find upgrades for their equipment, data centers and IT infrastructures. Here’s a great resource if you’re looking for an in-depth view.
Payments
Unless being entirely free, virtual worlds will be built on top of ultra efficient and secure payment systems. This is at the core of the concept of metanomics, with the discussion still splintered along the crypto vs fiat lines. In any case, the majority of metaverse-like environments available today rely on all-digital systems built on top blockchain technology. That is the case with Sensorium Galaxy, whose in-platform currency SENSO can be used across virtually all functionalities of this metaverse. We’ve detailed the use cases of our token here. Using cryptocurrency supports a decentralized economic system where the exchange of value is easy, safe, transparent and protective of the ownership rights of users.
Blockchain
Web 3.0 - of which the metaverse can be seen an an iteration of - presupposes the existence of online infrastructures based on decentralized blockchains where a token-based economy has been behind significant developments like decentralized marketplaces, content and data, all of which managed directly by the users of the metaverse. In this sense, metaverse exchanges are enabled by smart contracts, which help stipulate (rather, code) terms and conditions without the intervention of a third-party to oversee or execute transactions. Right now, a lot of the metaverse buzz about blockchain technology and the applications of crypto has focused on the creator economy that virtual worlds aim to foster. In particular, how it has led to the rise of non-fungible tokens (NFTs) and the ways in which it is fueling user-generated content (UGC). Blockchain helps support non-fungible tokens, or NFTs — digital tokens that represent proof of ownership of assets such as collectibles, original art, virtual real estate - creating an ecosystem ripe for content creation and monetization.
AI
Following Facebook’s rebranding to Meta last year, Mark Zuckerberg has consistently pointed to artificial intelligence as one of the biggest tech bets behind the company’s upcoming metaverse. That was certainly a core theme of a recent Meta presentation, where Zuckerberg unveiled a new batch of mega AI-centered projects. Earlier, Meta had already announced it was building an AI supercomputer aimed at running the next generation of AI algorithms. But Meta is hardly alone in this endeavor. Sensorium Galaxy, for example, has integrated AI extensively across its metaverse, from its AI-driven virtual beings to shaping the environments of which our users will be a part of, leading to more reactive and immersive experiences.
Content, Asset and Services Production
As the evolution of internet-based experiences, the metaverse needs high-quality content to anchor the user’s experiences in. As such, new applications are emerging to pioneer a shift in the way we engage with gaming, ecommerce, entertainment, fashion, etc. Both from a consumer and business perspective, integrating metaverse technologies like 3D content creation tools can lead to unimaginable creative outcomes.
While much of the tech isn’t quite there yet, we’re still likely to see mixed reality (AR/VR) platforms as the early beneficiaries of the metaverse race. The global market for this tech is forecast to reach close to $300 billion by 2024, up from $30.7 billion in 2021. And some would even argue these are only but moderate estimates give how fast the metaverse is evolving. That said, it’s clear that there’s a whole raffle of challenges to solve, including the high energy cost of running systems to support the metaverse. We won’t delve into it, but the backlash against the use of some crypto has been well documented.
Best Metaverse Stocks To Follow In 2022
We’ve already established that the metaverse will require faster processors, immense computing power, reliable networks and wearable accessories, all of which is now fueling new demands for the producers of these components. That can help explain why many investors have opted for a pick-and-shovel approach where they zoom in on the “building blocks” of the metaverse and its underlying infrastructure as opposed to investing directly in a metaverse’s stock like, say, Meta (FB).
Supporting areas include artificial intelligence, cloud computing, 3D graphics as blockchain as well as components like semiconductors, displays, servers and sensors.
Let’s then look at the top metaverse stocks worth tracking in 2022. Disclaimer: While we have highlighted the following stocks, this post isn’t intended to be perceived as financial advice.
Top 8 Metaverse Stocks
Meta Platforms (FB)
Does the name give it all away? Sure. Meta is a no-brainer stock that you should consider following, notwithstanding the epic plunge triggered by its latest earnings report. The company has delved deep into all things metaverse since the re-christening from Facebook, a bet that could lead to a massive pay-off down the line. Apart from the Family of Apps segment, which includes Facebook, Instagram and WhatsApp, it’s Meta’s Reality Labs that’s creating all the buzz. Reality Labs encompasses consumer hardware products, such as Meta Quest, Facebook Portal, as well as any related software and content. That division burned through some $10 billion on augmented and virtual reality projects in 2021 alone which, sure, might set some alarms off but still remained within Meta’s own estimates as per Mark Zuckerberg. It might be a while until the investment turns into a viable business, if ever, but for a company whose nearly all revenue comes from advertising, perhaps the diversification is a sensible move. Not to mention that Meta has positioned itself ahead of the competition; it was the first to unveil ambitious metaverse plans, it has consistently acquired key VR/AR tech, it’s leading several large-scale AI research projects and it has unveiled some of its first metaverse functionalities like Horizon Marketplace and social VR platform Horizon Worlds. So yes, Meta can be a hit and miss but long-term investors will surely appreciate the potential of making a big bet on VR/AR tech, which means that even if the metaverse flops, there could be a sizable payoff.
Nvidia Corp. (NVDA)
Nvidia’s processors are an ubiquitous presence in the gaming CPU market and its chips are increasingly being used in supercomputers and artificial intelligence processing. Potent processors capable of managing high volumes of data are at the core of the metaverse, and without enough graphic processing power, the metaverse won’t ever take off. Not only does Nvidia produce top of the line Graphical Processing Units, GPUs, the company has too been dabbling in the metaverse with its very own Omniverse, a platform for virtual collaboration and real-time physically accurate simulation of real life business problems. Also important to note is that Nvidia has released a specially designed GPU for crypto mining, which is proving to be a game-changer in the industry. The chipmaker is in a leading position to become a top player not just in the metaverse but across other sectors like gaming, AI, autonomous drying and data center computing. Nvidia can also boast of posting strong financials, with the company reaching an annual revenue of $26.91 billion in 2021, up by 61% year-over-year.
Taiwan Semiconductor Manufacturing (TSM)
With demand for mixed reality products taking off, many companies have turned to Taiwan Semiconductor Manufacturing for their much-needed chips. Even before the metaverse craze started taking off last year, the company had already made a big bet on supplying virtual and augmented reality ecosystems, making it a leader in the so-called chip arms race. Even today, the company’s chips can be found in a very sizable chunk of electronic products, from gaming consoles, computers and smartphones to an increasingly larger number of VR devices and data centers. As mentioned earlier, the metaverse will require real-time processing of large amounts of data that will have to be delivered to users at a large scale. For that, the need for chips made using advanced processing nodes will be crucial. Only three foundries, TSM, Intel, and Samsung are currently capable of producing these chips. TSMC has ramped up its 2022 capital spending and is expected to spend as much as $44 billion to beef up chip production. Revenue grew 24% year-over-year to $15.7 billion in the fourth quarter of 2021, topping estimates.
Unity Software (U)
Unity provides a software platform that enables the creation of real-time, interactive 3D content, and is one the two major video game graphics engines along with Unreal Engine. One of the biggest selling points is how it allows developers to build one single application that can be hosted across a vast range of platforms, from mobile phones, tablets, personal computers to gaming consoles and AR/ VR devices. In addition, it has software like Create Solutions that users can rely on to create deeply interactive 2D AND 3D content. The company’s products are widely used in the gaming industry as well as in design, animation, architecture and construction.
CrowdStrike Holdings (CRWD)
CrowdStrike Holdings is a cybersecurity provider known for its cloud-based security software. One of the main issues the metaverse will have to tackle is security and not many companies are able to address such large scale environments as the metaverse, as currently envisioned, could become one day. The company offers endpoint security to protect entities from potential data breaches with zero-trust protection for devices, applications and networks that are crucial to metaverse technology.
Immersion (IMMR)
Immersion can be seen as an under-the-radar sort of metaverse stock, but it’s slowly catching the eye of investors thanks to the haptic technology it helps produce. In fact, the company is a pioneer in this technology, holding 1,700 issued or pending patents. One of the goals of the metaverse is that it will provide users with multisensory experiences, including ‘touching’ the virtual worlds they’re in. Haptic technology is what will allow those inside the metaverse to fully utilize their touch. Companies like Apple, Nintendo, Samsung and Sony are among Immersion’s client list and the company is poised for a major boost as demand for haptic technology grows.
Matterport (MTTR)
Matterport's spatial data company has technology that enables business and individual users to digitize real world physical settings and create ‘digital twins’ that can then be manipulated in a dedicated 3D platform. So far, it sounds an awful lot like the basis of a metaverse. And perhaps that the allure that this stock has that others don’t. Matterport has over 6 million spaces under management and it has partnered with Meta Platforms to create1,000 digital twins available in a dataset which researchers can use to to teach robots and artificial-intelligence systems how to interact with the physical world. While currently a stock that’s taken somewhat of a beating, Matterport can be seen by many as a good long-term bet as the company’s technology could prove key in digitizing and uploading real-world spaces into the metaverse.
Autodesk Inc. (ADSK)
Designing the metaverse is a monumental task that requires dedicated software. Autodesk is best known for making software products for the construction industry with programs like Revid, and most notably, AutoCAD, used by engineers and architects to assemble design models. However, the company also offers a different range of 3D software tools that artists and designers can use to model, build and render 3D projects for the metaverse. If you’re interested in knowing more about how metaverse developers leverage software like this, we’ve put a guide together where we delve deeper into 3D modeling and the skills needed to become a metaverse developer.
Entering The Metaverse Through Crypto
As a backbone of the metaverse, crypto is also a buy to keep in mind for those wanting to enter the metaverse. Recently, we took a closer look at the best metaverse crypto projects so far in 2022, so you might want to take a look at that for some pointers. Another way of participating in virtual worlds is by purchasing non-fungible tokens (NFTs), which might or might not be connected to a particular metaverse. This means they can have utility beyond being used across multiple platforms. At last that is the idea behind the interoperability aspect of the metaverse, which we’re still a long way from seeing fully realized. Nevertheless, NFTs are linked to the ownership of digital assets like a plot of land, a piece or art, an avatar or simply the intellectual rights or royalties attached to them. The NFT market is quickly maturing and there are plenty of marketplaces and platforms you can start exploring today.
Bottom Line
Metaverse stocks are as hot as hot can be. Be that in crypto, VR, AR or a metaverse-like platform, there’s a banquet of options that investors can gladly feast on. Although no doubt a risky investment for some, the technology associated with virtual worlds has a solid growth path that many might not want to overlook. As with any emerging sector, there’s no sure-fire way of predicting the future of the metaverse so anyone looking to grab a bite out of this wild west should be ready to tolerate risk and uncertainty. Then again, that is the very nature of the stock market and the metaverse brings no innovation at least in that respect.
