The word Metaverse entered the investing vocabulary in 2021 and refers to shared environments which are created on the internet, or through sophisticated software that simulates the real world.
It is a fairly vague term and how it develops is still largely unknown.
In one sense, things in the Metaverse aren’t real because they have no physical form. On the other, they are very real because they can be experienced and appear lifelike through things like virtual reality (VR) or augmented reality (AR).
Mark Zuckerberg, the chairman of Facebook, now rebranded Meta Platforms Inc., (NDQ:FB) refers to the Metaverse as the internet brought to life in 3D. Mr. Zuckerberg describes it as a place you can enter, like the front door of a house. You see walls and stairs and rooms in all their dimensions, instead of a two-dimensional picture like a TV screen. It is a world of interconnected virtual communities. People can meet, work and play, using virtual reality headsets, augmented reality glasses, smartphone apps or other devices.
Facebook made the transition because it is losing the attention of teens and 20-somethings. Advertising volumes are slowing and its core social media business is aging. Younger users are turning to apps like TikTok and Snapchat. So, to stay relevant, it has to change.
The question for investors is how they should approach this emerging opportunity. Its boundaries and prospects are ill-defined. New technologies change the way we do things by creating new products and services, but the change tends to be continuous and incremental, rather than instantaneous and dramatic.
The good news is that most investors with a diversified portfolio are already in the Metaverse. The technology and brand leaders have all headed this way. Microsoft, Apple, Meta, Nike, IBM and others are rolling out products that plays to its development.
As the Metaverse grows, they grow with it because they are involved in the Metaverse’s value chain. This includes the development of hardware and software, building the communications networks, cloud storage of information and platforms that combine semiconductors with digital platforms. They have the financial strength and research and development depth to explore the opportunities and create new businesses over time.
It is not clear where all the opportunities are, although some seem intuitive. Avid gamers have been in the Metaverse for a while with characters or avatars that interact with other players. Nvidia Inc., (NDQ: NVDA) the graphic chipmaker creates virtual worlds and has further developed an Omniverse where chip designers can meet in a virtual reality space to collaborate.
Nike Inc. (NYSE: NKE) has applied for seven trademarks that include its intent to make and sell virtual branded sneakers and apparel. These digital fashion lines will be used to ‘dressup’ personal avatars. Other retailers are also experimenting and offering customers 3D views of their products online.
Healthcare applications are another area with potential. Here 3D or immersive technology can train nurses and medical students and give surgeons a better visual guide to surgery. Intuitive Surgical Inc. (NDQ:ISRG), a leader in surgical robots, uses virtual reality to provide training for its da Vinci operating system.
Stryker Corp. (NYSE: SYK), a leader in the global medical device industry is using Microsoft’s HoloLens to build operating room of the future by seeing the space and reimagining it. HoloLens is a mixed reality device which blends real with virtual things.
Cae Inc. (TSX:CAE) has developed a virtual reality trainer for military and civilian pilots. It sells similar systems for medical training. In the workspace, Zoom Technologies Inc. (NDQ: ZOOM) a leading work from home application is working with Oculus, a division of Facebook to create virtual conference rooms with a shared whiteboard. Participants will appear to be together in the room.
In other areas, Microsoft Corp. (NYSE: MSFT) has won US military contracts worth US $22 billion for augmented reality headsets. It is working with Greece’s Tourism ministry to offer an augmented reality tour of historic sites.
Apple (NDQ:APPL) is expected to introduce an augmented reality/virtual reality headset perhaps as early as this year. Scott Barlow noted in a recent Globe & Mail article, that the release of an Apple VR headset would be a catalyst for the software developer community to begin building the metaverse. Tens of thousands of software engineers now creating apps for Apple operating systems would turn their attention to VR-related programming, accelerating the viability of a virtual world.
These are just some of the applications from well known companies. There plenty more smaller companies and startups entering the space, all of whom want to become to next Apple, Google or Microsoft.
In the meantime, Big Tech will lead the way. Tagging along is a low risk way to take a look at this emerging area.