The metaverse — what is it? A singular place, or a number of different virtual worlds? Is it an online game, based on the blockchain, or is it an augmented reality situation that requires hardware? If you’re unsure what the answers to these questions are but want to invest in the metaverse, you’ve come to the right place.
There are many different takes on what the metaverse is. And in many ways, the term “metaverse” is one that’s abstract. There’s no real way to define the metaverse, other than to broadly define it as a virtual space in which individuals can interact.
This makes investing in something that’s hard to grasp even more difficult. With various mega-cap tech companies vying for market share in this nascent sector, it’s hard to pick the right “niche” to invest in right now.
That said, it’s clear many companies are making the metaverse their focus. Facebook famously rebranded to Meta (NASDAQ:META) with the hope of making a big shift in its focus. Indeed, going from the world’s number one social media platform to the leader in “the metaverse” (whatever that is) was a bold move.
With that said, let’s dive into three interesting ways investors can play this nascent space.
| NVDA | Nvidia | $179.24 |
| U | Unity Software | $39.88 |
| RBLX | Roblox | $41.59 |
Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA) is most commonly known for its high-performance chips and GPUs. Behind much of the gaming sector already, Nvidia has benefited from years of high growth in the gaming sector, particularly following the pandemic.
Of late, NVDA stock has been on a downtrend, as investors factor into this stock what could be an impending recession. However, from a long-term growth perspective, there’s a lot to like about where demand will be five, 10 or 20 years down the road.
The metaverse, or virtual gaming applications, require tremendous amounts of computing power. For Nvidia, this means more demand for its chips over time. Thus, as a “picks and shovels” play on the behind-the-scenes hardware that powers the metaverse, Nvidia is one of the more compelling options in this space.
Nvidia has made the metaverse a key focal point of growth via its Omniverse Enterprise product. Over time, this segment could make up a significant portion of the company’s revenue. Right now, it’s a bit of a gamble. But if investors are right, and the metaverse is “the next big thing,” Nvidia could be a key beneficiary.
Unity Software (U)
Unity Software (NYSE:U) is another unique behind-the-scenes player that is worth looking at when it comes to the metaverse.
This company enables game developers to create top-quality graphical content that runs cross-platform, including on laptops, phones, consoles and VR.
The company had a market share of 61% in the gaming market at the end of 2021. That’s significant, and one of the key drivers behind this stock’s previous rise.
Unity is working on quite a few platforms like Insomniac Events to develop new metaverse worlds. Also, the company is making heavy investments in the gaming sector. Various reports have indicated that the software from Unity has been utilized to develop more than 60% of the entire virtual world’s 3D content.
Over time, Unity will continue to grow its market share in augmented reality and virtual reality applications. How many of these define themselves as “metaverse-related” will be shown over time. However, it’s clear that other use cases involving graphics software (architecture, e-commerce, video animation, etc.) will also remain strong. Accordingly, this is a more “defensive” growth play tied to the metaverse that is worth a look, particularly at this lower valuation.
Roblox (RBLX)
Finally, we have a company that is often called a pure-play metaverse company. Roblox (NYSE:RBLX) is a leading video game universe that allows users to develop their own virtual world and invite friends to explore, play, learn and imagine. Accordingly, Roblox enjoys solid network effects as users who look for connection online do so in a bid to simply hang out with friends.
During the pandemic, Roblox’s user numbers exploded. With little in the way of real-world connection available, Roblox was a top source of interaction, particularly among teens and children. Thus, from a growth perspective, should these young people continue to use Roblox’s platform into their adult years, and pass traditions down to future generations, there’s a lot to like about the growth upside with this metaverse company.
Roblox’s recent numbers show how much growth is involved in the metaverse. The company’s Q1 revenues increased by 39% on a year-over-year basis to $537.1 million. Daily active users also shot up, indicating the pandemic boost this company got wasn’t a one-time event.
Should these numbers be repeated in the coming quarters, the market could catch on. For now, Roblox is a company that’s getting re-valued. For long-term investors, that can be a good thing, particularly for those looking to add a position.
On the date of publication, Chris MacDonald 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.
