How to Invest in the “Metaverse”

You ever hear of this thing called the “metaverse”? 

Of course you have, it’s been blasted all over the news. It’s trending on google trends. Unless you live under a rock, you know Zuck is trying to build an entire digital world just so he has another way to spy on us.

But I feel like we do owe some of the recent hype around this concept of the metaverse to Facebook as they did recently announce they would be rebranding to “Meta” and stated that going forward on earning reports they would break out the financials between their family of apps business (WhatsApp, Facebook, Instagram) and Facebook reality labs (focused on augmented and virtual reality).

Jokes aside, the metaverse isn’t a new concept. It is a future iteration of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.

If you keep up with recent shows or movies, we have seen this concept playout in TV shows like black mirror (San Junipero or USS Callister). Also the movie “Ready Player one” jumps into my head as well.

Of course the version of the metaverse isn’t nearly as cool as in those pieces of entertainment as we currently have people slapping on headsets and getting thrown into virtual meetings with avatars. For it to really take off, I think it needs to be more realistic and engaging. The metaverse needs to be built and invested in.

That is exactly the plan for a company like Facebook who is directing around $10 billion in 2021 alone towards the metaverse along with planning to hire 10,000 people to start building this future vision.

Total Addressable Market

According to emergenresearch.com the “metaverse” is expected to explode in the coming years.

We are talking about a 43% CAGR or a potential of $830 billion as an addressable market. That shows you how even though it doesn’t seem significant now, companies behind the scenes are preparing for the growth of this market and making investments to benefit from it’s potential in the coming years.

“Build it and they will come” – a quote I heard at some point in my life

Stocks Involved in the “Metaverse”

Meta (FB)

Let’s start off with the obvious player in the building of the next digital world. I mean the company literally rebranded and changed their name to meta for pete’s sake! 

They are using their current cash cow to fund some moonshots into a market that has potential to be massive. I don’t mind that approach as eventually the advertising spend may be capped by other companies and the organic growth slows down. 

Outside of the investments I mentioned above, this company has been planning for this move for a while in my opinion. In 2014 the company bought Oculus. Which at the time people have may been wondering why Facebook would be buying a virtual reality hardware company? As for me, I thought it was a great purchase.

At the time I was still in college and tuition was expensive (still is and getting worse). I mean schools have so much money they just keep building fancier building and sports arenas. I saw the acquisition and instantly thought of the disruption that Facebook could bring to education and the workplace. Imagine a world where your geographical location didn’t matter. You wake up and can transport yourself in a digital world. I was thinking of education and how one teacher could potentially teach 1000s of people at once in a visual environment (more than staring at a screen) and the cost would be way smaller than the price of physically attending school.

On top of these applications, I see Meta being able to integrate it’s current applications into this digital world with online avatars people can create in the “Metaverse”. Then Meta can also integrate advertising, ecommerce, and cryptocurrency as other ways to benefit from this digital world.

Other AR/VR Tickers: SNAP

Other Ecommerce/Payment Tickers: SHOP, SQ, PYPL

NVDA

One of the best performing semiconductor stocks out there is Nvidia as it has the leading edge tech around gaming, professional markets, artificial intelligence, and autonomous driving (pretty much anything that needs complicated data calculated quickly).

With a functioning “metaverse” that is seamless, I would imagine that the processing power and technology it would take to run things without lag would be massive. In comes players like NVDA to be the supplier of that tech and walk away with increases in revenue and profits. The only thing at this point I see stopping them is a competitor with better tech or supply constraints 🙂

Other Semiconductor Tickers: AMD, QCOM, TSM

RBLX

From the gaming side comes Roblox and they currently are probably the closest thing to an already existing Metaverse. I have never played the game, but from what I understand is that is more of a gaming platform where developers create games and Roblox makes money by selling virtual currency (which could easily be crypto later on as well) so players can access these other forms of entertainment or even virtual clothing.

It is pretty much the metaverse without the whole strap a headset to your head and pop into another world to move around. Instead the avatar is viewed from your PC screen. 

Other Gaming Tickers: U

AMZN/MSFT/GOOGL

At this point if something has anything to do with the future or tech, you have to count the big tech stocks as contenders. 

You also have the cloud computing along with edge computing that would be required to run this digital world. These large tech companies are well established to setup the hardware infrastructure in order for the Metaverse to operate smoothly. 

Other Cloud/Edge Computing Tickers: FSLY

CRWD

Cybersecurity stocks would also benefit as the digital world gets bigger and more value is involved, the more protection people would need for their own personal items.

Not to mention, whoever is running the metaverse would also need solid security in order for people to trust that they couldn’t get hacked or spyed on on.

Other Cybersecurity Tickers: OKTA, ZS

Meta ETF

If you don’t want to bet on a single horse you can bet on the farm. Roundhill Ball created the Metaverse ETF back in June and it has 41 different companies (including some of those we have discussed) indexed. The best part is that their ticker symbol is META (you know Zuck was pissed when he found out about that).

Only this is to watch out for the expense ratio, which is always something I look at when it comes to index investing. With this one it is at 0.75% ($75 annually for every $10,000 invested).

Other Markets to Benefit

NFTs

All the rage in 2021 is JPEGs of rocks selling for millions of dollars. And while that may be just rich people throwing around funny money or disguised money laundering, NFTs have created the ability to create unique digital assets.

Whether that is a digital art piece, digital house, or digital key to access certain content, NFTs would potentially play a role in the digital world. If the “metaverse” catches on and people give their presence in that world value, I would imagine having collectibles just like the physical world would also have real value.

Crypto

It could be used as just a form of currency in the digital world, or crypto could be involved with creating it’s own metaverse outside of private companies.

The currency angle is more obvious as you obviously don’t pay for things with cash in the digital world, so crypto could be that way to transact value between companies and people.

Here are some projects involved with already building out a metaverse within the crypto world:

Decentraland – A virtual destination for digital assets. Buy and sell LAND, Estates, Avatar wearables and names.

The Sandbox – is a virtual world where players can build, own, and monetize their gaming experiences in the Ethereum blockchain.

Enjin (MetaCity) – is a metaverse inspired by the game Minecraft, and it’s the world’s first free-to-earn NFT real estate.

Conclusion

You can see that there are plenty of companies or markets set up to do well with the success of the metaverse.

It comes down to two types of people.

The first is the one that thinks this whole “metaverse” is insane. I mean are we really going to be flying around in this digital world with our avatars and using it as a source of entertainment and connection? The concept is too far out there and these people see what the metaverse is today and cannot envision the capabilities of this world in the future.

Then you have the second group of people who think the metaverse is inevitable. That if the digital world is built to be engaging and seamless that the possibilities could be massive.

I’m in the second camp as I am thinking about 15-20 years from now. Taking a moonshot bet on the boom of the Metaverse could pay off big and I am a big believer in having some more speculative positions that may benefit from this scenario in my portfolio. The downside is limited while the upside is potentially massive.

What are your thoughts? Are you in group 1 or 2 🙂