Apple (AAPL) is getting most of the buzz today after the stock jumped 5% on earnings and drove the company’s market cap to $985 billion, making it the leader in the race to become the first company valued at $1 trillion.
iPhone sales were actually below estimates, but the company beat on both earnings and revenue thanks to better-than-expected results in software and services, which grew 31%. It’s abundantly clear that iPhone sales have leveled off. It will always be a big moneymaker for the company, but growth will never be what it was.
That’s why I’m more focused on those software and services, which is basically all of the stuff you can pay for to go with the iPhone, iPad and Mac computers. I’ve been saying this for a long time. We talked about it here in MoneyWire last summer, and the upside potential for one area is especially exciting.
Apple may or may not end up being a good investment on this theme, but there is a lot of money to be made in what’s to come with augmented reality (AR).
The New Reality
Last year, Apple released a new ARKit, which allows developers to make augmented reality (AR) apps for the iPhone. This is a cool new technology that is only going to get cooler and bigger.
Augmented reality sounds impossible. I mean, reality is reality, right? You can’t augment it.
Well, maybe not in the real world, but you can in the digital world. AR uses technological advances in cameras and graphics to bring together the real and digital worlds. We may one day have AR glasses where we see everything we’d typically look at on your phone pop up right before your eyes. It may be hard to imagine life without smartphones, but it is definitely possible. No more walking around with your head down and buried in your phone.
One of the best examples is Pokemon Go, which became a phenomenon two years ago at this time. It is an app that puts pictures of Pokemon characters in the world around you, and you’re supposed to capture them. You could be walking through Central Park and a demon appears, or one of them was supposedly on the North Lawn of the White House. The popularity was a glimpse into how this technology should catch on.
More apps have since come out. You can now dissect a frog digitally. Or hang artwork from the masters in your room. You can redesign your living room and see what it will actually look like, lighting effects and all. And why not “try on” clothes to see what they look like from the comfort of your own home?
It’s all possible with AR, a market that could grow from nearly nothing today to $100 billion in just a couple of years, according to Digi-Capital.
When it comes to investing in this trend, I want my profits to be real but augmented as much as possible. Where to look? Well, the big boys are all going after it, but it will be one part of otherwise huge businesses.
One of the more pure plays in the augmented reality/virtual reality space is Himax (HIMX), which makes some of the hardware like chips, controllers and displays and more. The stock has been cut in half over the last eight months, and I would not buy it here, but it is a company I continue to follow.
I’m currently researching a lesser-known company that is involved with giving augmented and virtual reality an actual feel. In other words, you can feel as if you’re touching something that isn’t there. There are many applications in gaming and beyond, and I like what I see in this early-stage company that I expect to recommend to my readers soon.
Augmented reality is one of the new and exciting parts of the next Technology Revolution. This is yet another powerful mega-trend that is going to last for the next decade if not longer and give us opportunities to make big money along the way. And that’s reality.