10 Metaverse Stocks for the Future of Technology
With the market size for metaverse stocks expected to balloon by the end of this decade, these 10 names are worth a closer look.
A witches' brew of macro economic factors – decades-high inflation, rising interest rates and fear of a global recession – has clobbered the stock market in 2022. Add in Russia's invasion of Ukraine, record prices at gas pumps, crashing crypto currencies and a global COVID-19 pandemic that refuses to fade into the background and the situation for investors is a confusing mess. Where do you look for growth? The answer is the metaverse.
Not sure what the metaverse actually is? Here's a more thorough explainer, but at the highest level, it is a virtual, online world.
Momentum around the metaverse has grown rapidly. The first time many people heard of the concept was last October when Facebook announced it was changing its name to Meta Platforms (META), with a focus on bringing the metaverse to life.
Two months later, Bloomberg projected that the metaverse could be a nearly $800 billion market opportunity. At the start of April, Citi released a report that projects the addressable market for the metaverse will reach between $8 trillion and $13 trillion by 2030.
With many of the tech companies that will drive the metaverse suffering significant pullbacks in their stock value in 2022, the opportunity for investors is considerable. Buy now to get in early on that metaverse-fueled growth, and do so at a discounted price compared to what most of these stocks traded for last fall or even at the start of the year.
The key is to choose the stocks that are set to benefit the most from the rush to the metaverse. A lot of companies have sensed the excitement and are making moves to be part of the next big thing. However, only a few are going to be integral to the metaverse, reaping the big rewards. Here are nine metaverse stocks and one exchange-traded fund (ETF) that are positioned to be big winners on this next wave of technology.
Data is as of Aug. 8. Analysts' ratings courtesy of S&P Global Market Intelligence.
- Industry: Internet content & information
- Market value: $17.2 billion
- Analysts' consensus recommendation: 2.46 (Buy)
Many analysts remain bullish on Snap (SNAP, $10.41), even with the shares plummeting 78% for the year-to-date and reporting disappointing second-quarter results.
The top- and bottom-line misses in Q2 came as "tough macro conditions drove an advertising slowdown in many industry verticals," says BofA Global Research analyst Justin Post. Still, Post maintains a Buy rating on the stock.
"We remain constructive on the stock given Snap's leading user growth (June in line with TikTok per SensorTower), under-monetized surfaces (Maps/Spotlight), and long-term ARPU [average revenue per user] expansion opportunity which positions the stock well for an eventual sector recovery," Post says. He adds that SNAP shares are trading at an attractive valuation following their recent slide.
What about the metaverse, though? Is Snap a way to invest in the next technology big thing? It is, even though the company's CEO has been openly dismissive of the metaverse – at least the metaverse as envisioned by Mark Zuckerberg.
Instead, Snap is continuing to focus on developing AR hardware through its Spectacle smart glasses. In other words, Snap may not be playing the metaverse game according to meta's rules, but it is proving successful in delivering the AR glasses that allow for the augmented reality experience that people are seeking.
- Industry: Internet content & information
- Market value: $449.1 billion
- Analysts' consensus recommendation: 1.73 (Buy)
Meta Platforms (META, $170.25) seemingly kickstarted the metaverse race last fall when it changed its name to Meta from Facebook to Meta. The company is determined to lay claim to the metaverse and has big plans for monetizing the digital world.
In a June CNBC interview, Meta CEO Mark Zuckerberg laid out his ambitious vision:
"We hope to basically get to around a billion people in the metaverse doing hundreds of dollars of commerce each, buying digital goods, digital content, different things to express themselves. Whether that's clothing for their avatar or different digital goods for their virtual home or things to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and across the metaverse overall."
Analysts have concerns about Meta, including younger users abandoning Facebook and the potential for regulatory measures as a result of ongoing government investigations. However, despite the challenges, with META stock in a slump – shares are down 50% for the year-to-date – the potential for long-term growth as a result of its metaverse strategy is very real.
- Industry: Consumer electronics
- Market value: $2.65 trillion
- Analysts' consensus recommendation: 1.69 (Buy)
Apple (AAPL, $164.87) has been playing the long game on the metaverse and it seems as though the company's endgame is about to be revealed.
In 2017, Apple officially began to embrace augmented reality with the release of its ARKit development tools. Plus, AAPL has been stealthily working on an AR headset for years, and it was reportedly demonstrated to the company's board of directors earlier this year.
Apple CEO Tim Cook has been talking up the technology for years. "I couldn't be more excited about the opportunities we've seen in this space, and sort of stay tuned and you'll see what we have to offer," Cook in June told China U.S. Daily (via CNET).
The assumption is that Apple is set to release its long-awaited AR headset early in 2023. When that happens, expect AAPL to weaponize its roughly 1.8 billion devices in active use globally, as of January, with pitches to buy the AR headset and related services. The company is set to suddenly become a big metaverse player.
Until that happens, concerns will remain over whether Apple can maintain iPhone demand. But with the Dow Jones stock down nearly 8% so far this year, the time may be right to make a pre-AR blitz investment.
- Industry: Semiconductors
- Market value: $443.4 billion
- Analysts' consensus recommendation: 1.67 (Buy)
Many big tech names are set to benefit from the mega infrastructure requirements of the metaverse. Still more will sell hardware to users that can connect to the metaverse for a superior experience. These include PCs, headsets and game consoles.
One company that is set to reap the rewards on all those fronts is Nvidia (NVDA, $177.93). The company makes the graphics cards that are in gaming PCs, the advanced GPUs used for high performance servers, the custom chips found in game consoles, and the chips used to power some of the most advanced AR headsets. No matter who makes the biggest strides in the metaverse, NVDA is set to profit from their success.
In addition, Nvidia has its Omniverse content creation platform, already used by creators and companies to build 3D content and simulations.
With the semiconductor stock down nearly 40% since the start of the year, the opportunity to invest in a metaverse building block is tempting.
- Industry: Entertainment
- Market value: $198.7 billion
- Analysts' consensus recommendation: 1.66 (Buy)
Walt Disney (DIS, $109.11) has seen its shares slide by nearly 30% in 2022. The company was hammered through the pandemic with theme park closures, cruise cancellations and empty movie theaters. Since then, DIS has struggled with a contentious new CEO and an epic battle with the governor of Florida over that state's "Don't say Gay" bill. And its pandemic star Disney+ streaming video service is seeing subscriber growth slow.
However, all is not lost. As the effects of the pandemic wane, attendance is growing at theme parks and cruises has resumed. Movies are back.
Looking ahead, Disney's opportunity for growth in the metaverse is significant. This is not a company that will be building out technical infrastructure or hardware to access virtual experiences. However, DIS is the world's largest publicly traded media and entertainment company. It owns valuable franchises like Marvel and Star Wars. When it comes to content including themed worlds and AR entertainment, expect Disney to be a dominating presence.
That will be reflected eventually in the DIS share price – making it one of the best metaverse stocks to watch going forward.
- Industry: Internet content & information
- Market value: $19.3 billion
- Analysts' consensus recommendation: 1.64 (Buy)
2022 has not been kind to Match Group (MTCH, $68.11) stock. Shares are down over 48% since the start of the year. However, the company has big plans for the future. A new CEO took over in May, and, in its second-quarter earnings release, the company said it is replacing the head of Tinder and reorganizing the segment's management team.
The real upside for MTCH stock may well be the metaverse. Last year, Match announced its biggest ever acquisition, spending $1.73 billion for Korean startup Hyperconnect. That bought Match Group an avatar-based dating experience complete with "Single Town" a virtual space for meeting.
Amid the company's recent shake-up, MTCH's plans for a virtual dating environment and Tinder Coins, its in-app currency, have been scaled back. "We'll continue to evaluate this space carefully, and we will consider moving forward at the appropriate time when we have more clarity on the overall opportunity and feel we have a service that is well-positioned to succeed," CEO Bernard Kim wrote in the company's Q2 shareholder letter.
He added to this in Match's Q2 earnings call. "I love the idea of virtual goods and currency in Tinder, but I believe it hasn't been approached in a completely logical way," Kim said. "While it's frustrating to pause the efforts, I think it's super important that Mark [van Ryswyk, Tinder's chief product officer] and I deliver the right value proposition, so this can be a long-term revenue stream."
In the meantime, MTCH's sharp decline in 2022 allows investors to scoop up on of the best metaverse stocks for future growth at a big discount.
- Industry: Internet content & information
- Market value: $1.53 trillion
- Analysts' consensus recommendation: 1.38 (Strong Buy)
Google parent company Alphabet (GOOGL, $117.30) is a prime example of a tech giant that has positioned itself to be a winner in virtually all aspects of the metaverse.
The cloud – with data centers packed full of servers – is going to be the key to the metaverse succeeding, and it is where those virtual worlds will be hosted. Google has a 10% share of the cloud infrastructure market, according to market intelligence firm Synergy Research Group. This makes it the third biggest player, behind Amazon.com (AMZN) and Microsoft (MSFT). The gaming aspect of the metaverse? Google's Stadia cloud gaming service has been going since 2019.
When it comes to AR headsets, the company was a pioneer with Google Glass. That early release was far from a commercial success, but Google has continued to build its IP for augmented and virtual reality headsets since then. The company is known to be working on an AR headset operating system. In March, it acquired Raxium, a company that makes microLEDs used in AR and VR headsets. In terms of entertainment, the company already has YouTube VR up and in operation.
"We think there are significant opportunities for greater connected device usage and enhanced advertising around AR glasses, and Google has inherent advantages given its advancedAI/ML capabilities," says BofA Global Research analyst Justin Post (Buy). "We would expect an AR product launch over the next two years."
At this point, Alphabet stock is down nearly 20% so far in 2022, with challenges including weaker-than-expected paid search revenue. That creates an opportunity to get one of the best metaverse stocks at a discount.
- Industry: Internet retail
- Market value: $1.42 trillion
- Analysts' consensus recommendation: 1.37 (Strong Buy)
When it comes to e-commerce giant Amazon.com (AMZN, $139.41), the name of the metaverse game is cloud infrastructure. And Amazon dominates this area. Amazon Web Services (AWS) currently owns a 33% share of the cloud infrastructure market. And a huge chunk of the money that's going to be spent on hosting virtual worlds will be going into AMZN's coffers.
In addition, count on Amazon to be leveraging its e-commerce presence in the metaverse, as well as taking advantage of ad revenue opportunities.
Amazon shares have dropped by nearly 19% since the start of the year. The company faces a wide range of challenges including supply-chain issues, inflationary pressure and gas prices that are raising delivery costs. In addition, the company raced to build new warehouses to meet pandemic demand that has since declined.
The short-term pain for AMZN stock makes it an attractive option for investors shopping for stocks that are set to benefit as the metaverse gains steam.
- Industry: Software – infrastructure
- Market value: $2.09 trillion
- Analysts' consensus recommendation: 1.34 (Strong Buy)
Microsoft (MSFT, $280.32) should be a no-brainer when it comes to the best metaverse stocks. The company's Azure web services is second only to Amazon for market share. Nearly 75% of PCs globally still run Microsoft Windows. The company operates a highly successful video game division including Xbox game consoles and the Xbox Live network. It owns one of the most successful proto-metaverse properties in Minecraft. And it is in the process of acquiring video game giant Activision Blizzard (ATVI), which in turn owns other early metaverse properties including World of Warcraft.
Microsoft was also a pioneer in AR headset development with the HoloLens – which landed the company a deal with the U.S. Army that was valued at up to $21.9 billion. Sounds great. Except, the head of the HoloLens division resigned earlier this year amid accusations of inappropriate behavior. And at this point, Microsoft is reportedly pondering the entire project's future.
Still, investing in Microsoft offers the opportunity to take advantage of the company's strong position in metaverse development – even if its AR headset ambitions are in question. With MSFT you have the added reassurance of continued strength in software revenue, including Windows and Office. As Morgan Stanley analyst Keith Weiss wrote in April, "This is why we own software."
And with MSFT shares down almost 17% for the year-to-date, it seems like an attractive time to scoop up the stock at a relative bargain.
Roundhill Ball Metaverse ETF
- Assets under management: $559.2 million
- Expenses: 0.59%, or $59 annually for every $10,000 invested
Finally, here's an option for investors who want to take advantage of the opportunity that the metaverse offers, but are uncertain about what stocks to pick. The Roundhill Ball Metaverse ETF (METV, $9.67) invests in prominent metaverse-related companies, with its researchers and analysts doing the hard part for you.
Here's how the company describes its mission:
"Roundhill believes the Metaverse will become the successor of the current internet and will build an experience that spans the virtual and 'real' world."
And it is designed to give investors exposure to this new technology through a focus on companies developing infrastructure for the metaverse, as well as those creating virtual worlds and pioneering content, commerce and social experiences.
Its portfolio is largely made up of large-cap companies including Apple, Nvidia, Amazon and Meta. But it also includes promising smaller companies, and non-tech entries like Nike (NKE) that are making metaverse-related moves.
If you feel that the metaverse and its massive addressable market is something you should be investing in, Roundhill Ball Metaverse ETF helps to reduce the risk.