The metaverse is a virtual reality that may become an everyday reality. Facebook’s rebranding as Meta last year brought the growth of this alternative universe to the forefront of investors’ minds, but what is the metaverse and what investment opportunities could it open up?
The metaverse is seen by many as the next phase in the evolution of the internet, Web 3.0, where the physical world meets with virtual and augmented reality. People will be able to interact over the internet in a shared environment made real via these two alternative realities through specialist headsets, such as Oculus, or glasses.
For investors willing to embrace this paradigm shift, there may be an early move advantage with the metaverse forecast to be worth $800 billion by 2024, according to Bloomberg Intelligence.
“The internet will end as we know it and the metaverse will totally reshape the global economy,” said Tarik Chebib, Capital.com’s Chief Revenue Officer.
Upcoming Revolution
So how far off is this reshaping? The gaming sector, where users are already familiar with interacting through alternative realities in games such as Fortnite and Roblox, will be a cornerstone of the metaverse. And with 3.2 billion gamers globally, there is plenty of potential demand for the revolution to tap into. Plus, the gaming industry also brings with it the software knowhow to provide the backbone for the metaverse to build on. The one area that is lacking is on the hardware side, according to Chebib, with the need for a seamless solution that doesn’t involve people having to wear cumbersome headsets to participate.
With that hurdle to overcome, it seems more a matter of when rather than if the metaverse establishes itself in everyday life. But who are the companies that investors could seek out to piggyback onto this upcoming revolution?
Facebook’s rebranding as Meta was a pretty blunt signal as to where Mark Zuckerberg wants to position his company as we enter this next phase. Having bought the company for $2 billion back in 2014, Meta owns the Oculus headsets, currently the biggest player in the virtual headset world.
Another social media giant, Tencent, the dominant force in China with its WeChat app, is potentially better positioned than Meta to be the metaverse leader. The Chinese company boasts stronger gaming expertise as the leading games distributor in China as well as ownership stakes in Epic Games, the creator of Fortnite and Roblox Corp. Add in Tencent’s cloud infrastructure, artificial intelligence capability and digital payments service and the company appears to have most of the key metaverse ingredients.
Gaming Win
Another potential winner of the rise of the metaverse is the gaming sector itself, which according to Bloomberg Intelligence is forecast to account for about half of the market by 2024 worth $400 billion. As well as Epic Games and Roblox, the other major player is Microsoft, who already owns the most popular video game of all time in Minecraft. Microsoft further cemented its dominance with its recent purchase of Activision Blizzard, makers of Call of Duty, for $69 billion, the biggest acquisition in the video-game industry’s history. Where Microsoft leads, others are likely to follow.
“Video games help us visualize what the metaverse could look like,” Chebib said. “Gaming companies are really interesting cases as they have already created worlds where people buy skins, avatars and collect different things.”
The rise of the metaverse will likely need a huge amount of hardware to support it, playing into the hands of NVIDIA, a giant of the semiconductor and graphics card world. The company recently reported record quarterly revenue at $7.6 billion with gaming the main driver, contributing $3.4 billion of that record revenue having risen 37% from a year earlier. NVIDIA is looking to go a step further and be both supplier and creator in the metaverse by developing its own platform, Omniverse.
The internet itself is another area that will need bolstering for the metaverse to run effectively. Samsung is working on a 6G network that it hopes will provide the rapid speeds required. South Korea, where Samsung is based, is one of the most advanced countries in adopting the metaverse with Seoul, the nation’s capital creating a metaverse alliance with over 200 companies. While in China Huawei is also working on 6G and expects it to hit the market in 2030.
NFT Explosion
The retail sector may see a dramatic transformation with the rise of non-fungible tokens, or NFTs. To illustrate the scale of this burgeoning market auction house Christie’s sold an NFT of a print by digital artist Beeple for $69 million last year. The explosion of NFTs in 2021 has seen the valuation of the global market soar to about $40 billion, catching up fast with the estimated value of real-world art.
Now major fashion and retail brands such as Gucci and Nike are creating NFTs of their designs for people to buy to clothe their avatars in the metaverse. Nike has even built a digital store in the Roblox metaverse.
Finally, all these transactions need processing and crypto-currency Ethereum has become the dominant marketplace for NFTs and appears to be an early frontrunner as the metaverse’s currency of choice, offering investors another way to jump onto the virtual bandwagon.
“We’re so early with the metaverse,” said Chebib. “Spend some time trying to understand what is happening and try to identify potential opportunities. Whether you take them or not, that’s still up to you.”
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