Is The Metaverse ‘Far Fetched’ or the Future of the Internet?

By Kirsteen Mackay

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Our 'Key Themes For 2022' is designed to help you identify and capitalise on the areas to watch out for. Here we have the Metaverse.

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The metaverse is a 3D virtual reality in which our simulated selves may all live someday. It’s being touted by Big Tech companies like Meta (NASDAQ: FB) (formerly Facebook), Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA), as the start of Web 3.0 and a future virtual existence, we can all look forward to embracing.

Why should you care? Well, if Big Tech is interested, it stands to reason we should be too. And the metaverse certainly seems to be an investment theme worth watching in 2022.

What are the metaverse stocks?

While the metaverse seems futuristic and far-fetched at the moment, Facebook founder Mark Zuckerberg is taking it very seriously indeed. And he projects that we’ll be fully immersed in a version of the metaverse within the next ten years.

At the same time, institutional investment manager Fidelity is recommending a 5% allocation to crypto for investors looking to diversify their portfolios. Given that crypto and blockchains are intertwined with the metaverse, this is a bullish indicator for the future viability of all three. 

Investment in the sector has already begun. Meta Platforms like, Nvidia, Nike (NYSE: NKE), Roblox (NYSE: RBLX), Amazon (NASDAQ: AMZN), Unity (NYSE: U) and Qualcomm (NASDAQ: QCOM) are plowing billions into R&D in artificial intelligence (AI), virtual reality (VR), augmented reality (AR), holograms, simulations, customized avatars, and wearable tech.

Along with the big names are several newcomers. The Metaverse Group, Matterport (NASDAQ: MTTR), Soul App, Glimpse Group (NASDAQ: VRAR) and Yalla Group (NYSE: YALA) are also making waves in the metaverse.

How does the metaverse work?

NVIDIA’s Omniverse is touted as a potential operating system of the metaverse. At the same time, Microsoft (NASDAQ: MSFT) is another obvious contender thanks to its extensive Cloud SaaS enterprise. This has it well placed to help companies transition to the metaverse.

Furthermore, the speculative bubble in NFTs has spurred impulse buying of all manner of virtual goods. From images to display in virtual galleries to all-out virtual land grabs. This fast-growing cybernetic space is home to a psychedelic swathe of innovative start-ups.

For instance, Decentraland is a virtual world owned by its users and backed by the Ethereum blockchain. Here users can buy and sell virtual land, Avatar wearables and usernames in the Decentraland Marketplace.

The Metaverse Group describes itself as “the world’s first virtual real estate company” and focuses on buying, developing and selling real estate within the metaverse. It recently purchased a 500-square-meter plot of virtual real estate for $2.4m in Decentraland. This broke the record for the largest ever metaverse land acquisition.

This plot of virtual land is located in Decentraland’s fashion precinct. And as bizarre as that may sound, those involved believe fashion is the next big growth area in the metaverse.

In fact, The Metaverse Group envision utilizing their expensive purchase to develop a space for hosting fashion shows and e-commerce. By partnering with real-world brands, they believe they’re launching an extremely lucrative venture. Adidas has already hosted an exhibition auctioning its designs as NFTs. 

Celebrity endorsement

Meanwhile, celebrities and musicians are endorsing an array of blockchain projects that could see them performing, selling tickets and merchandise in the virtual space.

Tokens.com (NEO: COIN) is a publicly-traded company that owns an inventory of DeFi and NFT based cryptocurrencies. It is the majority owner of The Metaverse Group, and it generates revenue through staking tokens.  

Meanwhile, Tencent-backed Soul App is a virtual social playground where people can create, share, explore and connect. Soul uses AI algorithms to match users with their ideal soulmates, giving users a safe and effective platform for communicating, sharing feelings, and finding new friends.

After four previous VC funding rounds, it is leading in the virtual friendship space and raised $167m in an equity investment round in June. Nevertheless, Soul’s metaverse reputation may be slightly exaggerated as it’s more in line with a traditional social networking platform than an open and creative new world.

For the past ten years, Minecraft has captured the imaginations of children everywhere. Roblox soon followed suit with its multitude of interactive offerings. These games allow players to immerse themselves in a virtual world where they engage in real-life activities such as building and decorating homes, farming and socializing with friends.

As COVID-19 lockdowns brought families together for long periods stuck at home, teenagers and adults also became captivated by the virtual way of life. And this new normal is a glimpse into the metaverse.

At its March 2021 IPO, Roblox (NYSE: RBLX) was considered the world's first public firm focused on building a metaverse. However, according to Valens Research, Roblox management may be overstating the potential of their $90m acquisition of community platform Gilded. They also may be stretching the potential of the metaverse, particularly for the future of enjoying music and their positioning as a pure-play metaverse company.

Glimpse Group (NASDAQ: VRAR) allows consumers to try-before-you-buy with its 3D digital experience:

And Matterport (NASDAQ: MTTR) is doing the same for real estate. Its all-in-one platform transforms real-life spaces into immersive digital twin models.

Meanwhile, Dubai-based social networking app Yalla Group (NYSE: YALA) recently announced its plans for a social metaverse app to be released early in 2022.

Emerging markets

In emerging markets, South Korea, China, and Taiwan are heavily involved in manufacturing the world’s tech hardware, including semiconductors and AR/VR hardware. The advent of the metaverse is further fuelling demand for semiconductors and advanced tech. Thus, it may well help prolong the tech cycle dominance.

Crypto and blockchain power the metaverse

When the crypto markets surge, interest in virtual offerings such as NFTs boom too. Therefore, if interest in crypto continues to soar in 2022, it stands to reason interest in NFTs and the metaverse will too.

The Ethereum blockchain effectively processes the smart contracts vital for confirming the exchange of goods in the metaverse. That’s one reason the 2021 boom in NFTs boosted the Ethereum price, and many crypto fans now prefer Ether to Bitcoin.

Real-world disruption

If the rise of the metaverse is realized in the way Zuckerberg predicts, it could disrupt and displace some traditional real-world businesses. For if people are happy to meet up and socialize with friends and family in a virtual setting, they may no longer be inclined to visit cinemas, bowling alleys, restaurants and bars in real life.

This would inevitably lead to unemployment in the real world, but could many new jobs be created in the virtual world? In recent years High Street shops have been replaced by big supermarkets and online e-commerce giants like Amazon. But large grocery chains arguably employ many more people than the small community stores of years gone by.

There’s no doubt the advent of the metaverse will create many jobs in new areas. Developers, designers, writers, creators, financial whizz kids and experienced marketers will all make their way in this exciting new world. But not everyone displaced in the real world will find suitable employment in the metaverse, so there’s sure to be trade-offs along the way.

Risks in the rise of the metaverse

There are risks in any investment, but investors must be on guard with something as new and unknown as the metaverse.

It’s very early days, and there is always the risk that the metaverse is nothing more than speculation and hype. If, for instance, the NFT market turns out to be a scam of epic proportions, it will adversely affect those companies operating in and around the metaverse.

Springer Nature recently conducted a study showing 6.1m NFT trades to be directed by a tiny number of entities. Therefore, it seems logical to expect increased regulation will be forthcoming.

 Here are some other risks to consider:

  • Fake metaverse companies

  • Government intervention

  • Potential restrictions

  • Speculative valuations

  • Rug pulls

  • Addiction

  • Crypto assets could be lost or stolen

For investors looking to access the metaverse via an ETF, there are already some available.

  • Fount Metaverse ETF (MTVR):

  • Roundhill Ball Metaverse ETF (META): Holdings include Nvidia, Roblox, Amazon.com, Meta Platforms, Unity and Qualcomm Inc.

Alternatively, there are many stocks with a metaverse angle to choose from.

  • Meta (NASDAQ: FB) (formerly Facebook)

  • Microsoft (NASDAQ: MSFT)

  • Nvidia (NASDAQ: NVDA)

  • Nike (NYSE: NKE)

  • Roblox (NYSE: RBLX)

  • Amazon (NASDAQ: AMZN)

  • Matterport (NASDAQ: MTTR)

  • Glimpse Group (NASDAQ: VRAR)

  • Yalla Group (NYSE: YALA)

  • Tokens.com (NEO: COIN)

Want to know more about our other key themes for 2022? Download our exclusive free report.

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In this article:

Topics:
Internet Services and Infrastructure
Virtual Reality (VR)
AI
Industries:
Information Technology
Consumer Discretionary
Companies:
Facebook
Roblox
Microsoft
NVIDIA

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.