Three stocks to help you ride the Metaverse boom

What is the metaverse?

The metaverse took a step into the mainstream when social media colossus Facebook announced on October 28 that it was changing its name to Meta to reflect the company’s new focus: building a new, entirely virtual environment for people to interact in.

That’s the metaverse in a nutshell, according to the company: a digital landscape where users can meet, work and play in real-time using a VR headset or internet-connected device.

“It’s the next evolution of connectivity, where all of those things start to come together in a seamless, doppelgӓnger universe,” Victoria Petrock, principal analyst with market research firm Insider Intelligence, told Reuters, “so you’re living your virtual life the same way you’re living your physical life.”

It sounds an awful lot like Second Life, the once-popular video game platform where users don digital avatars and interact with their counterparts from around the world; only in the metaverse, your job will be there, too.

Launched in 2003, Second Life was a brief hit in the days before social media gave people cooler, more appealing ways to promote themselves and yell at each other, but it hasn’t been as popular since. The company’s CEO told Vice in 2020 that the platform has about 900,000 active users.

But one thing Second Life had going for it, and still does to a lesser extent, is a virtual marketplace where people spend real money. In an era where online shopping has become so convenient, where people have grown accustomed to buying goods by tapping Instagram photos or TikTok videos, the metaverse is expected to have a hefty consumer component, where companies and users can buy and sell on the platform.

In addition to taking a cut from what could be millions of sales, the groups behind the metaverse will also generate revenue by providing the infrastructure, web services and data security necessary for creating a trustworthy online community. If the metaverse takes off, these service and technology providers could help investors make a killing.

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Which metaverse companies might be worth investing in?

The companies expected to drive the metaverse are all pretty big names, which means you should be able to educate yourself about each one and invest in them fairly easily — maybe even with your spare change.

1. Meta (formerly Facebook)

Mark Zuckerberg’s brainchild has already gone full-bore into creating the metaverse. Meta has spent 2021 snapping up VR companies. David Wehner, the company’s CFO, told investors in October that Meta’s investment in virtual reality, approximately US$10 billion for 2021, will increase “for the next several years.”

Meta’s all-in. If the metaverse catches on, there’s no telling how much data and targeted ad revenue the company could stand to make. And if it doesn’t, it still has Facebook, Instagram and WhatsApp to keep investors happy.

Meta stock is up almost 22% this year.

2. Roblox Corporation

Roblox’s hybrid business model — part online game, part game creation system — seems perfectly suited for the metaverse.

“I think there’s a possibility that ‘Metaverse’ gets a little bit overused, but it’s something that we’ve been working on for a very, very, very long time. And we like our approach quite a bit,” the company’s CFO, Michael Guthrie, told Barron’s in November.

Roblox is already wildly popular with kids. The company told The Verge in July that over half of U.S. children and teens under the age of 16 play the game, which now allows users to host their own in-game events.

In addition to mastering the kind of tech that will power the metaverse, Roblox has a dedicated user base: over 47.3 million daily users and 9.5 million developers as of the third quarter 2021.

3. Nvidia

Smooth, pristine graphics will be at the heart of the metaverse experience. As the world’s leading provider of graphics processors (and no slouch when it comes to making the chips that enable mobile computing), Nvidia’s tech could be central to bringing the metaverse to life.

Nvidia already has its fingers in a number of profitable pies. The company’s products are in the laptops, workstations, PCs and mobile devices used by millions of companies and individuals. Metaverse or no, Nvidia’s role in today’s tech landscape is secure.