As an expression of the digital age, the metaverse comes in many forms depending on investor focus. One could view it as supplemented or displaced reality via augmented reality/virtual reality headsets like Meta Platform’s (NASDAQ:META) Oculus Quest or Apple’s (NASDAQ:AAPL) Vision Pro. As we delve deeper into this realm, identifying promising metaverse stocks to buy becomes crucial. The app ecosystem, which forms the baseline for metaverse content, offers numerous opportunities for savvy investors to capitalize on this evolving market.
Metaverse could also be viewed as the totality of different components. In addition to augmented reality, it would bring in tradeable digital assets from various blockchain networks. This would form a new layer of the economy conducted in virtual space.
On top of it, artificial intelligence (AI) agents would then bring an additional layer of immersion for people to interact with e-commerce, gaming and social networking. According to a Mordor Intelligence report, the metaverse market size is about $116 billion in 2024. By 2029, it is forecasted to grow by a compounded annual growth rate (CAGR) of 41.83% to $670 billion.
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The question is, which are the metaverse stocks to buy that will power this growth to the benefit of shareholders?
Advanced Micro Devices (AMD)
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As a chipmaker in competition with Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD) is seldom viewed as a metaverse stock. However, if this market is to gain mass adoption, AMD will play a key role.
Known for its high-performance graphics processing units (GPUs) and central processing units (CPUs) that are also competitively priced, AMD is now pushing accelerated processing units (APUs) further. These chips combine both central processing and parallel graphics in a single package. Since the introduction of Fusion APU in 2011, these chips now rival modern gaming consoles with the Ryzen 8000G series.
In other words, AMD is opening the way for cheap mini PCs that don’t require expensive and bulky discrete GPUs. In that capacity, AMD is creating all-purpose computing platforms which is exactly what the baseline metaverse layer would need.
Interestingly, the financial markets have shown a mixed reaction to AMD’s innovations and market positioning. Over the last year, AMD’s stock increased by around 66%, reflecting investor optimism about its role in emerging technologies. However, Nvidia saw a substantial rise of around 188% largely due to its dominance in AI technologies. AMD, on the other hand, has not gained as much traction.
The company is releasing Kraken APUs next year as the next level of performance on 4 nanometer (nm) chip nodes. In the meantime, AMD is heading against Nvidia on the AI front as well with the more cost-effective MI300X chips. Most importantly for investors, Nvidia stole the AI spotlight, leaving AMD stock somewhat underutilized.
At the present price of $166.33, AMD stock is still far from its all-time high of $227.30 this past March. One-year consensus price targets place AMD shares at $192.56, indicating a potential for a $265 per share ceiling.
Unity Software (U)
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While AMD, Intel and Nvidia provide the hardware components for metaverse blocks, Unity Software (NYSE:U) is the dominant software platform to create metaverse content. Its Unity Engine is widely used across mobile, console and desktop computers due to easily accessible development tools and a vast library of online tutorials.
According to a 6sense survey, Unity holds 27% market share in the game development category. For comparison, the Unreal Engine from privately-held Epic Games, holds 16% market share.
Following the departure of Unity CEO John Riccitiello last October, the company is yet to balance its licensing monetization approach. On May 9, Unity delivered its first-quarter earnings. Despite a net loss of $291 million, the bulk went into restructuring costs ($212 million) and convertible notes ($61 million).
In that light, Unity’s net loss would have only accounted for $141 million. That is a significant improvement over last year’s $254 million net loss. Moving forward, much is expected of Unity 6 for easier multiplatform deployment and AI tools.
On the monetization front, developers can take advantage of Unity’s integrated Unity Ads and ironSource Ads platform. Unity gets a cut from any deals. On that progress to profitability, Unity Software holds $1.2 billion in cash and equivalents.
For metaverse investors, this translates to buying on the weakness, which typically provides the greatest profit potential long-term. Given these factors, Unity Software emerges as a compelling choice among metaverse stocks to buy. Year-to-date, U stock is down 45%. At the present price of $21.27, U shares are far removed from their all-time high of $201.12 in November 2021. Nasdaq’s average U price target is $29.05 per share.
Vuzix (VUZI)
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There have been many attempts at unassuming AR glasses, but Vuzix (NASDAQ:VUZI) appears to have hit the sweet spot with Vuzix Z100. Revealed at the Consumer Electronics Show 2024, these smart glasses can embed prescription lenses and run for two days on a single charge. As investors explore metaverse stocks to buy, Vuzix offers intriguing potential due to its innovative products and ongoing projects.
The glasses are designed as workflow augmentation rather than immersion. Vuzix built upon three decades of extended reality (XR) experience to develop them. Still a penny stock, Vuzix delivered a net loss of $10.048 million in Q1 2024, in line with the year-ago quarter at $10.241 million.
Given the reduced sales of M400 glasses, the company saw a 52% decline in revenue. Yet, Vuzix remains positive for the near future with “several new projects with new and existing defense and consumer product-focused customers” during 2024.
Similar to China’s adoption of smart glasses in law enforcement, the same trend is likely to unfold in the U.S. VUZI stock is down 25% year-to-date. At $1.60 per share, VUZI shares are now 19x lower from the all-time high of $30.57 in April 2021. Yet, the average VUZI price target is nearly double at $3 per share.
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On the date of publication, Shane Neagle 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.
Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.
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