Virtual reality (VR) was once heralded as the next big thing in tech after smartphones. But VR failed to catch on in a meaningful way. What has been slowly gestating in the background is another technology that combines elements of VR with real-life. Augmented reality (AR) overlays virtual information on top of a real-life view. AR can be implemented on a device like a smartphone, on a headset, or on a display such as a car’s windshield.
The applications are endless. At this point, AR is being used to great effect in video games, online shopping, education, healthcare, and industrial applications.
If you want to invest for the future in a rapid-growth sector, these augmented reality stocks are my top picks.
- Apple (NASDAQ:AAPL)
- Autodesk (NASDAQ:ADSK)
- Etsy (NASDAQ:ETSY)
- Snap (NYSE:SNAP)
- Alphabet (NASDAQ:GOOGL)
- Microsoft (NASDAQ:MSFT)
- Qualcomm (NASDAQ:QCOM)
AR technology is proven, the augmented reality market is real, and it’s projected to enter into a phase of explosive growth. In 2019, the AR market was worth $10.7 billion. By 2024, it’s on track to hit $72.7 billion — growing at a CAGR of 46.6%.
AAPL stock growth over the past decade was largely driven by iPhone sales — but the smartphone market is saturated. Apple has been working on products like the Apple Watch and AirPods, along with services like Apple TV+ to keep growth on track despite declining iPhone revenue.
While the company has yet to find its next truly killer product, it’s betting big on AR being the next iPhone or iPod. The groundwork began being officially laid in 2017 with the release of ARKit. This augmented reality platform for iOS brought AR into the mainstream on the iPhone and iPad. Games like Pokemon Go proved incredibly popular. Meanwhile, IKEA brought AR shopping to customers, who could position photorealistic furniture within a display of their actual home.
The company has continued to develop that technology. The new iPhone 12 Pro has a LiDAR scanner that’s expected to be leveraged for an even more immersive AR experience. And Apple’s CEO is publicly bullish on AR. At a conference in Ireland in January, he told the audience:
“I’m excited about AR. My view is it’s the next big thing, and it will pervade our entire lives.”
The real prize for Apple, though, won’t be augmented reality on a smartphone. It will be AR glasses. The company has been at work on these for years, and there are rumors so-called “Apple Glasses” could be ready for launch in 2021. If the company nails it, Apple Glasses could be that next iPhone, the must-have device that drives the next phase of massive AAPL stock growth.
It doesn’t take much imagination to see how Autodesk ended up on our list of augmented reality stocks. The company is best known for its AutoCAD (Computer-Aided Design) software.
But it’s much more than AutoCAD. Autodesk also offers digital prototyping software, consumer software, and products like Maya that are popular tools for movie special effects and video game animations.
Every element of Autodesk’s business will benefit from increased consumer and industry interest in AR. The company began to implement augmented reality capability in its products in 2017, adding AR support to its Forge platform.
ADSK stock has been riding a wave of consistent growth for the past five year, posting gains of 284% during that time. As augmented reality becomes widely adopted, Autodesk is one of the key companies supplying the creative platforms to make that happen.
Etsy is the e-commerce platform with a focus on hand-crafted and vintage items. And face masks.
You don’t go to Etsy for a bulk order of toilet paper to be delivered to your home the next day. But it’s a great way to find a one-of-a-kind dining table, a vintage 1960s lava lamp, or a funky print for your living room.
So what does all this have to do with augmented reality?
In June, Etsy announced it was introducing AR support in its mobile app. This lets users take a photo of their room, and then overlay Etsy products within that space for a realistic view of what they would look like in real life. The AR feature is currently in beta and it’s limited to wall art (paintings, prints, and photos) for the time being, but it has the potential to be a very big deal.
ETSY stock has had great a year as people shop online and decorate their spaces. I’m certainly not complaining about a 203% gain so far in 2020!
The inclusion of AR support makes the Etsy shopping experience much more immersive. That makes people more likely to buy. No one really talks about this, but AR — being able to see what a product looks like in your home environment before hitting the Buy button — should also cut down on returns. And no retailer likes returns.
Augmented reality has the potential to play a big role in keeping that Etsy momentum going, especially as it’s rolled out to support more products.
Snap is best known for its Snapchat social media platform, but made headlines in 2016 with Snap Spectacles. These sunglasses with a built-in video camera that were sold out of vending machines generated plenty of buzz, but they were a costly flop. Piles of the unsold glasses sat in warehouses. Snap took a $40 million write down on them in 2017. And unsurprisingly, SNAP stock took a hit on that news.
What did surprise many was that Snap doubled down, releasing a new version of the Spectacles. And here’s where things get interesting on the augmented reality front. Third generation Snap Spectacles were released last November, with a big price jump. $380 is roughly double the price of previous versions. Why the expensive price tag?
One reason is a more upscale design. The other is the addition of a second camera for depth capture, paving the way for AR. The company is planning to combine the new Spectacles with Snapchat and its Lens Studio platform to deliver a compelling AR experience. In an interview, the company’s CEO told The Verge:
“I do think this is the first time that we’ve brought all the pieces of our business together, and really shown the power of creating these AR experiences in Lens Studio and deploying them through Spectacles. And to me, that is the bridge to computing overlaid on the world.”
Snap is expecting AR to grow in importance over the next decade. By laying the groundwork now, it stands to sell more hardware and to sign up more users on Snapchat.
As a result, SNAP is positioned to be one of the augmented reality stocks with real long-term growth potential.
Alphabet (GOOG, GOOGL)
GOOGL stock is another good bet when it comes to benefiting from the coming AR revolution. Like Apple, Alphabet’s Google has been deeply involved in augmented reality development. Google has its own AR platform for Android (ARCore), and has incorporated AR features in products like Google Maps.
Unlike Apple, Google has already released augmented reality glasses. Originally released (in a limited access “Explorers” program) in 2013 for $1,500, Google Glass fell flat.
There was public resistance to the idea of glasses-mounted cameras potentially recording everything, Glass was very expensive as a consumer product, the design was considered unfashionable, and as AR glasses they didn’t have a lot of application beyond the initial wow factor.
Google retired Glasses as a consumer product, but soon brought back an Enterprise version. The company is having success in that market. Last year it released Google Glass Enterprise Edition 2. These look more like regular glasses, have better battery life, and a lower $999 price tag.
With the success Google is seeing on the Enterprise side and the opportunity that affords the company to keep tweaking its design, don’t count out a future return to the consumer AR market by Google Glass.
Microsoft has also been playing a long game on augmented reality. In 2016, the company released HoloLens, a head-mounted display running its Windows Mixed Reality software.
While Microsoft showed off HoloLens in a consumer environment at first — demonstrating it with the game Minecraft — it was looking firmly at enterprise applications. HoloLens was relatively large and bulky, and very expensive, at $3,000.
Now in its second iteration, HoloLens is being used in a wide range of AR applications including manufacturing, product design, and even surgery. While Microsoft’s focus with HoloLens has always been in commercial applications, its years of refinement and expertise could eventually pave the way for a consumer version.
Whether the company moves into the consumer market or continues its current strategy, look for MSFT stock to make gains as global augmented reality adoption ramps up.
Finally, a chipmaker that’s set to benefit behind the scenes from AR. While the previous augmented reality stocks have been focused on AR platforms and devices, Qualcomm is a leader in the chips that make AR possible.
For example, Google Glass Enterprise Edition 2 runs on Qualcomm silicone. Tucked inside those AR glasses you’ll find a Qualcomm Snapdragon XR1 processor.
Augmented reality is also incredibly data-intensive. Whether playing an AR game on a smartphone or walking around a city with AR glasses overlaying key information in real-time, there’s a lot of data involved. Lots of data with no lag — that’s just what 5G is good at. And Qualcomm just happens to be the leading supplier of 5G modems for mobile devices.
If Augmented reality picks up the way its projected to over the next few years, that will be a big boost for QCOM stock. It’s already on fire this year as demand for 5G smartphones such as the iPhone 12 ramp up, but add a surge in demand for AR-capable chips and that would be a potent one-two growth punch for QCOM.
On the date of publication, Louis Navellier had a long position in ETSY, GOOGL, and MSFT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.