Analysts still think the metaverse will be a big deal and that the future of metaverse investments remains bright. Contrive Datum Insights says the space will be worth $1.3 trillion by 2030. Adecco Group says $5 trillion. Others believe it will be worth at least a gazillion trillion dollars by then.
I’m not so sure. The vaunted plans of Meta Platforms (NASDAQ:META) haven’t quite panned out as expected. Companies that were throwing billions at the concept are now backpedaling.
Microsoft (NASDAQ:MSFT) fired all 100 employees of its industrial metaverse project and shelved it. Disney (NYSE:DIS) followed suit a month later by eliminating its metaverse division.
I rather view the metaverse as more akin to the personal transportation device Segway rather than how we will live, work, and play in the future.
Segway was the two-wheeled, self-propelled vehicle that was hailed as a revolution in how people would get around. Some even thought it was going to be bigger than the internet. But sales never materialized.
The Segway became a small, very expensive, niche vehicle arguably best suited for certain commercial and industrial applications (think mall security guards or certain airport workers).
While the metaverse likely has more potential than that, investors will be better served by being cautious about what they buy. Don’t go for those stocks touting how they will revolutionize the world through the metaverse. Instead, buy companies helping others trying to build this new future. More the picks-and-shovels sellers to the miners rather than the miners themselves. They’ll be winners whether the metaverse is booms or busts.
That’s why I think the following stocks are the future of metaverse investments.
Qualcomm (QCOM)
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The intense computing power required for metaverse applications means they will need chips that can handle the load. Qualcomm (NASDAQ:QCOM) has developed such compatibility for over a decade.
Last year, Qualcomm partnered with Microsoft to develop processors built on the Snapdragon architecture. And though Microsoft killed off its metaverse special unit, it continues to work on other extended reality projects. Its mixed reality toolkit (MRTK) for developers and enterprises is a joint effort between it, Qualcomm, and Magic Leap, and will debut in September.
Qualcomm also established a $100 million metaverse investment fund. It will finance “developers and companies building immersive experiences with AR, mixed reality, and (virtual reality).”
Qualcomm CEO Cristiano Amon sees metaverse industrial applications exceeding social media and gaming opportunities. “You’re always going to have the big social network, consumer play…but industrial is big,” he told CNBC’s Jim Cramer. He’s also said artificial intelligence will be what drives all of Qualcomm’s business.
Helping others to build out their metaverse dreams will reward Qualcomm investors handsomely.
Verizon (VZ)
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Telecom giant Verizon (NYSE:VZ) is another company that isn’t a direct metaverse stock but should be a lucrative investment nonetheless. Just as metaverse companies need chips to handle the computing power AR and VR require, they need the bandwidth to make the experiences happen. That’s what Verizon brings to the table.
The ongoing national rollout of 5G networks is important for consumers and the applications that will deliver the mobile experience.
Today’s communications infrastructure isn’t enough to support the intensive 3D, AR, and VR overlays of reality the metaverse requires. Verizon’s 5G Ultra Wideband Network will create more immersive and realistic virtual spaces.
The telecom’s chief strategy officer states, “our collaboration with Meta will explore how Verizon’s (multi-access edge computing) infrastructure can deliver intensive XR cloud rendering and low latency streaming.”
The metaverse is going to be a collaborative effort. No one company will build every component it needs. Verizon arguably has the best capabilities to deliver the speed and connectivity all players require. Even better, its stock is also incredibly cheap, trading at levels not seen in decades.
Global X Metaverse ETF (VR)
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And now for something completely different. Because there are no true metaverse pure-plays, perhaps an exchange-traded fund (ETF) targeting companies focusing on the metaverse is the next best thing.
Global X Metaverse ETF (NASDAQ:VR) invests in companies developing and commercializing the metaverse. To be considered for inclusion, a company must derive at least half its revenue from metaverse business activities. It will also consider “pre-revenue” stocks as long as they work in the field. Companies that derive less than half of their revenue from the metaverse can also end up in the ETF if their primary business is directed toward the metaverse.
Those criteria sound like they can include just about every stock on the market. However, there are currently just 40 stocks comprising the fund. Its top five holdings include Nvidia (NASDAQ:NVDA), Meta, NetEase (NASDAQ:NTES), Coinbase Global (NASDAQ:COIN), and Unity Software (NYSE:U).
Shares of the ETF are up 22% year to date, outperforming the S&P 500. It’s also 35% above last November’s lows. Global X Metaverse only launched in May 2022, so it doesn’t have much of a track record yet. But if you think the future of metaverse investments remains bright, you may want to consider adding the ETF to your portfolios.
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.
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