For all the hype surrounding the creation of a digital, artificial intelligence-driven world, the metaverse doesn’t really exist. At least not the vaunted dual existence where we can live without the constraints of reality. So finding the top metaverse stocks to buy is not as easy as it might seem.
For one, most people never heard of the metaverse before Facebook changed its name to Meta Platforms (NASDAQ:META). So putting a hard and fast definition on it is difficult even for its most enthusiastic advocates.
Yet companies are throwing billions of dollars at it to be a part of what could be the next super trend. Or it could just be a complete waste of money.
I’ll admit I’m probably not the target demographic for this venture. I can barely make sense of spending $200 for a real pair of Nike (NYSE:NKE) Jordans let alone wrapping my head around spending $186,00 on a pair of virtual sneakers.
A year ago people had spent $14 million on footwear they couldn’t even wear. At least the Gucci version was a reasonable $17.99. But people were still paying for just a digital representation of an item.
While an investment in Meta still might be worthwhile, here are three companies I think are August’s best metaverse stocks to buy.
Roblox (RBLX)
Online kids’ gaming platform Roblox (NASDAQ:RBLX) should be atop every investor’s list. The company developed a thriving ecosystem that features a record 66 million daily active users. It produced $2.2 billion in revenue last year and this year’s first-quarter revenue was up 22%.
Roblox takes a three-pronged approach to the metaverse:
- Roblox Client lets users explore virtual worlds.
- Roblox Studio lets developers create and publish the virtual experience.
- Roblox Cloud provides the services and infrastructure needed to power the platform.
Roblox is a company perfectly suited to the metaverse because its gameplay environment was designed for a virtual world. It also allows other companies to populate their experiences.
Nike’s Nikeland exists in the Roblox digital universe. It lets users buy and wear virtual goods after paying for them with in-game currency. Walmart (NYSE:WMT), Tommy Hilfiger, and others also have a home on Roblox.
Because Roblox’s target users are tweens, brands have a chance to establish a relationship with a real customer early on. With the stock down 23% over the past 12 months, it represents an attractive entry point for investors.
Nvidia (NVDA)
Graphics chip maker Nvidia (NASDAQ:NVDA) is another perfectly positioned metaverse stock.
Because of the enormous computing power needed to render these complex virtual worlds, Nvidia’s chips are primed to take advantage of the situation. It already leverages its advanced graphics and video-processing chips for high-end servers, scientific computing, autonomous vehicles, and various other AI and virtual reality applications. The metaverse fits neatly into these computationally intensive fields.
Nvidia’s Omniverse platform integrates the 3D animation tool Blender with Adobe’s (NASDAQ:ADBE) Substance 3D software suite. Omniverse also uses Disney‘s (NYSE:DIS) open-source universal scene description (USD) from Pixar to let developers collaborate on 3D renderings. Nvidia plans to evolve USD into “a foundation of the open metaverse and 3D internet.”
If the metaverse does have legs, Nvidia will be one of its primary beneficiaries.
Unity Software (U)
Unity Software (NYSE:U) is one of the two primary 3D video game engines (the other is the Unreal Engine from Epic Games). It has come to prominence because of its ability to deploy across dozens of platforms while offering key game development tools: graphic design, sound, and monetization features are available in a single, easy-to-use format
The combination makes its engine more accessible to more developers and creators. Half of all the world’s PC, console, and mobile games are powered by Unity.
Unity is witnessing record growth. Revenue surged 80% year over year to $533 million, even beating management’s guidance. Yet Unity has been plagued by losses, though it became profitable on a pro forma basis in last year’s fiscal fourth quarter. It is intent on expanding those margins. Unity also became free cash flow positive in the second quarter and plans to build on that foundation as well.
The common theme among Unity Software, Nvidia, and Roblox is they aren’t necessarily consumer-facing metaverse stocks. Rather they are selling the picks and shovels to the miners attempting to strike gold in this alternate reality.
I have my doubts about whether the metaverse will be a viable experience long term. These three stocks, however, are top metaverse stocks for August that should profit from it even if it becomes a virtual bust.
On the date of publication, Rich Duprey did not hold (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.
