When you hear the term blockchain, it’s difficult not to simply focus on the technology’s headline development in cryptocurrencies. But the innovation is so much more than that. While speculation dominates public discourse on decentralized protocols, the third iteration of the internet (called Web 3.0 or Web3) could offer positive societal and economic implications. Therefore, it truly behooves you to consider Web3 stocks to buy.
But what exactly is this third generation of connectivity? According to a detailed report from NPR, the nascent days of the internet represented Web 1.0. The ability to connect your computer to a wider network was a profound concept at the time. However, the network was grossly disorganized, presenting a “Wild West” ecosystem that failed to deliver practical applications.
Then came Web 2.0, which started in the mid-2000s. Big tech firms quickly dominated the web ecosystem, providing easy-to-navigate browsers and search engines and eventually, social media platforms. The movement became a true digital community, but with one problem: the strongest institutions dictated terms, not individual users. And this is why Web3 stocks to buy have become a massive talking point.
As NPR stated simply, “Web3 is about grabbing some of the power back.” Thanks to the blockchain — and thus the ability to transact digital assets of value without the need for an overarching third-party intermediary — web users can decentralize the power structures that big tech arbitrarily imposed. Of course, this has massive implications for Web3 stocks.
Better yet, the beauty of this coming evolution in connectivity is that there’s no one set category that defines third-gen internet companies. Basically, any company that promotes or benefits from decentralized protocols would qualify.
Here are some Web3 stocks to consider:
- Nvidia (NASDAQ:NVDA)
- Advanced Micro Devices (NASDAQ:AMD)
- IBM (NYSE:IBM)
- Fastly (NYSE:FSLY)
- Coinbase (NASDAQ:COIN)
- TE Connectivity (NYSE:TEL)
- Sociedad Química y Minera de Chile (NYSE:SQM)
As with any innovation, critics abound. For me, one of the biggest risks is the economic incentive. Sure, blockchain-based reward tokens theoretically power decentralized communities. Nevertheless, those tokens only have market value because of investor speculation, potentially posing issues for Web3 stocks.
Still, if you’re a forward-thinking individual and see decentralized protocols as the future of the internet, it might make sense to consider Web3 stocks. Sure enough, many of them are on discount due to rising fears of the pandemic.
Web3 Stocks to Buy: Nvidia (NVDA)
If we’re going to talk about Web3 stocks, no discussion is truly complete without mentioning Nvidia. Perhaps best known for its gaming-related graphics processing units (GPUs), NVDA stock has been one of the clear beneficiaries of the crypto complex’s rise. Through its hardware, crypto miners provide the technical contributions to keep the blockchain running.
Even more, Nvidia is truly diverse tech powerhouse. One of its most exciting divisions is its deep learning center. According to the company’s website, deep learning is a subset of artificial intelligence and machine learning, using “multi-layered artificial neural networks to deliver state-of-the-art accuracy in tasks such as object detection, speech recognition, language translation, and others.”
Cynically, an argument exists that Nvidia’s deep learning initiatives will eventually serve a deleterious effect to society due to the replacement of human workers with machines. However, there’s also a massively positive implication as it relates to Web3 stocks. Eventually, Nvidia’s tech could replace centralized third-party intermediaries (such as brokers or market makers), thus truly making the internet free.
Advanced Micro Devices (AMD)
If I mention Nvidia among the best Web3 stocks to buy, it’d be dangerous not to mention AMD. And I mean this quite literally. AMD features some of the investing market’s most ardent supporters, so failing to give it its due could be detrimental to one’s health and safety.
Well, I’m being a bit facetious, but no matter what you think about the semiconductor firm, it too has been a huge beneficiary of the crypto industry’s rise. It’s hard to imagine now, but five years ago, AMD stock traded hands at a little over $10. Since then, it’s gone up nearly 14 times, a stunning return.
Moving forward, you might not see the same reward profile, but for contrarians, the ongoing Covid-19 pandemic presents a possible time-machine opportunity. With the world gripped with omicron variant fear, those who prefer to zig while others zag could key in on early reports that suggest omicron-related infections produce mild symptoms.
If so, the tech selloff could be overdone, making AMD one of the Web3 stocks to buy on discount.
Web3 Stocks to Buy: IBM (IBM)
Whenever someone brings up IBM to discuss — oh, pretty much anything — chances are, the subsequent criticism will revolve around the company’s lack of relevancy. Of course, anyone that has been following IBM over the past few years knows that this is not the most accurate assessment, to be diplomatic about it.
For one thing, Big Blue’s artificial intelligence initiatives brings hugely positive implications for Web3 stocks. By shifting more intermediary functions to AI and machine learning protocols, IBM can exponentially advance the next generation of internet connectivity. Basically, it’s an economic proposition. Machines don’t take breaks (other than required maintenance items). They don’t complain, nor do they want to unionize.
They just do what they’re told — every micro-manager’s dream come true!
Interestingly, IBM has a deep history with Web 3.0 — perhaps deeper than any of the other Web3 stocks on this list (or any list). I dug up this tidbit from CBS News from June 2009 which mentioned IBM as possibly riding the Web 3.0 wave.
Yeah, people were talking about the third gen of the internet during the immediate aftermath of the Great Recession. Crazy!
Although it might not seem like it on paper, Fastly is in my opinion the most controversial inclusion on this list of Web3 stocks. On the surface, that might seem like a strange argument. As a provider of content delivery network services, Fastly brings the internet closer to the source of demand, thus boosting performance and reliability.
If you’ve ever wondered how your favorite websites function so well almost anywhere you go, then a CDN is most likely your answer. Basically, CDNs allow companies to store data on their servers, thus keeping the distance to data similar to users throughout the globe.
In a way, CDNs represent decentralized infrastructure. Unfortunately, they’re still under a central command system, and that could be a problem when a company like Fastly goes down, as it did not too long ago. Therefore, many “true” proponents of Web 3.0 are looking to develop decentralized CDN solutions.
But the issue with decentralized CDNs is compensation, something I raised earlier. Individuals could contribute data storage capacity for a decentralized CDN but they’re going to expect items of economic value. Given the recent volatility of cryptocurrencies, however, a centralized CDN like Fastly might still be the most practical approach.
Web3 Stocks to Buy: Coinbase (COIN)
Admittedly, it’s difficult to talk about Coinbase following the dramatic rout in cryptocurrencies. As I’m writing these words — of course, your mileage will vary by the time you read this — only two of the top 20 cryptos by market capitalization have gone up in the last seven days, not including stablecoins.
Otherwise, it’s been nothing but red ink for the crypto sector, which is worrying on many respects. For one, several digital assets fell clear through major critical support lines. Second, with so much speculation baked into the capital markets, it’s likely that many people are leveraged to the hilt. Therefore, the pressure to unwind cryptos could be far greater than the incentive to buy.
Still, if you have a long-term outlook (I’m talking five years or more), then you might soon see a gargantuan discount in COIN shares. Moreover, what I like conceptually about Coinbase is that you’re selling tickets to the game as opposed to wagering on a particular team.
If Web3 stocks are the future, Coinbase is worth consideration.
TE Connectivity (TEL)
If there’s one aspect about Web 3.0 that is superior to connectivity technologies in the past, it’s near-comprehensive digitalization. Increasingly, we’re hurtling toward an ecosystem where everything operates on the cloud. Thus, we’re gradually decentralizing ourselves from the physical tethering of devices.
But if there’s one aspect that’s worrying about Web 3.0, it’s also digitalization. Our web connectivity solutions still depend on physical mediums. In other words, bring faulty equipment to the table and Web3 stocks don’t look so great anymore.
However, this is also the reason why investors interested in the future of the internet should consider TE Connectivity. A leading manufacturer of connectors and sensors for multiple industries, TE is particularly important for the 5G rollout. Essentially, the company provides the physical backbone of connectivity solutions, enabling users to enjoy the benefits of the next-gen internet without giving it a second thought.
Further, with demand for advanced communications infrastructures only to rise higher, TEL can simply tag along for the ride. It’s not the sexiest of Web3 stocks but most importantly, it gets the job done.
Web3 Stocks to Buy: Sociedad Química y Minera de Chile (SQM)
If we’re going to talk about the future of the internet, it’d be remiss not to mention the future of transportation. Sure, developments such as the metaverse enable our personalities to decentralize from the physical limitations of our bodies. But let’s be real. Even traveling to Bakersfield, California is a lot more exciting than ascending to the top of a digital Eiffel Tower.
Of course, many if not most analysts regard the future of transportation as electric. And while electric vehicles may not directly have anything to do with Web 3.0, the spirit of decentralization is evident in the burgeoning industry. Primarily, EVs decentralize the automotive community from the hegemony of big oil firms. True, some folks are natural-born petrol heads. Even so, the rise of EVs and alternative-fuel vehicles give everyone a choice.
Considering that lithium is already ramping up to be one of the most critical commodities, the bullish case for Sociedad Química y Minera de Chile — a lithium mining firm — makes plenty of sense. No, it’s not the most direct approach to Web3 stocks. However, with transportation increasingly incorporating developments from the Internet of Things, SQM probably has a bright future.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.