We are living in a time when technology is changing the world and innovations are permanently transforming our everyday lives. One of the major changes in the coming years will likely be the metaverse, which can be described as the future of the internet. The metaverse is a cyberspace that merges the real world with virtual experiences. It is a digital world where we will be able to communicate, work and play.
The merging of the real and virtual worlds is achieved through enormous technological advances in virtual reality (VR) and augmented reality (AR). We are at a turning point where virtual reality will become mainstream. But how can investors take advantage from this megatrend at an early stage and invest in promising projects related to the upcoming metaverse? In this article I will present metaverse stocks and alternative investments to invest in the metaverse as the next generation of the internet. The development of the Internet 3.0 has begun!
- What is the metaverse?
- Metaverse as a vision of the future
- Will the metaverse replace the internet?
- How to invest in the metaverse?
What is the metaverse?
The metaverse is a digital world in which millions of users with their digital avatars can immerse themselves in a virtual reality. This virtual world appears so real that users can fade out and forget the real world around them. The metaverse, as a combination of reality and virtual reality becomes a place where people can come together, work and play. In the future, this parallel digital world will expand the internet three-dimensionally.
The idea of a metaverse is still science fiction to many people. But the development of a functioning metaverse is progressing steadily. A large number of companies around the world are working on the realization of parallel digital worlds. Facebook CEO Mark Zuckerberg, for example, has started his own metaverse division in order to build a functioning metaverse with his company in the future. So, the metaverse is not just a buzzword; it is starting to become reality.
Metaverse as a vision of the future
The idea of a metaverse is not new. The topic has been the theme of science fiction novels and movies for decades. There are also great parallels to the gaming industry, where virtual worlds are already a reality. But the cyberspace in the form of a metaverse takes what we know from computer games to a whole new level. It will be a 3D version of the internet where people can live their lives through their digital avatar. It will be possible to establish a presence in virtual reality, with everything that goes with it, such as digital goods, properties, jobs and entertainment.
The movie Ready Player One can give you an impression of what a metaverse could look like. It is a science fiction film from 2018 directed by Steven Spielberg. The movie is, of course, for entertainment purposes, so there is no shortage of drama, intrigue and special effects. But at its core, the movie presents a functioning metaverse that is an extension of reality. This metaverse includes much that is already reality for us today, such as digital currencies, NFTs, digital surveillance, virtual reality, augmented reality, play-to-earn elements, and more.
But to get an idea of a metaverse, you don’t have to limit yourself to movies or books. In 2003 Second Life was launched, a virtual world which can be described as a functioning metaverse. This metaverse was created by the San Francisco based company Linden Lab. In this virtual world, users can live a second life with their avatar. Second Life basically is a 3D role-playing game (MMORPG), but there is no predefined plot. Users create an avatar and can then interact with other users, explore virtual worlds, buy properties, create, buy and sell virtual goods, and even earn money in the form of a virtual currency called Linden Dollars, which is exchangeable for real money.
Will the metaverse replace the internet?
Initially, the metaverse will be an extension of the internet, not a replacement. The metaverse basically can be seen as the Internet 3.0. You can think of it as bringing the digital reality of the internet into the 3rd dimension. But the metaverse will not just be a virtual playground. It will be a virtual reality that never stands still, just like the real world. Users will hardly experience any boundaries in this virtual world, and there will be many overlaps with reality.
Similar to Second Life, in the Internet 3.0 you will be able to go shopping in virtual three-dimensional stores, meet friends in virtual places, play games together with players from all over the world, and also pursue a regular job. Career-wise, you can think of a job in the metaverse like a virtual home office. Remote working in the 3rd dimension. All this will be made possible by virtual reality and augmented reality in conjunction with mutually compatible platforms, services and digital worlds.
How to invest in the metaverse?
The metaverse will be a gigantic market, recently estimated by Bloomberg Intelligence at $800 billion by 2024. There is already a gold-rush atmosphere among some tech companies and the race to dominate the metaverse has begun. This creates interesting investment opportunities for investors who want to invest in the metaverse and benefit from the upcoming Internet 3.0.
To invest in the metaverse megatrend, there are several options available. However, it is important to realize that this market is just emerging and is therefore still in a very early phase. At the moment, it is not possible to foresee which company or which product will prevail in the metaverse of the future. It therefore makes sense to diversify your investments accordingly. The following are investment ideas related to the metaverse.
Metaverse stocks: Companies that build the metaverse
Investors who want to benefit from the development of the metaverse can invest in metaverse stocks. These are stocks of companies that play a role in the creation of the metaverse. However, it’s not always easy to find the best stocks for each investment theme. The following companies are betting heavily on the metaverse, investing billions in the technology that is expected to bring physical and virtual worlds closer together than ever before. Metaverse stocks are interesting investment opportunities in that they allow you to invest in this megatrend from the beginning.
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- Facebook (Nasdaq: FB) – Recently, Mark Zuckerberg communicated his vision to transform Facebook in the next five years from a social network into a “metaverse company”. Facebook has invested hugely in virtual reality, spending $2 billion to acquire Oculus, which develops its VR products. The company invests billions in research and development every year, and already has billions of users.
- Roblox (NYSE: RBLX) – Roblox is an online entertainment platform where games can be developed and played. The focus of Roblox is currently mostly on the younger generation of players. In the future, however, older users may also to be attracted to the virtual worlds in Roblox. The digital worlds in Roblox currently come closest to a functioning metaverse. The platform has its own digital currency and allows users to socialize and have unique virtual experiences.
- Unity (NYSE: U) – Unity Software develops the Unity engine, one of the two major 3D video game engines used by the majority of game development studios. If the metaverse becomes a reality, Unity could help companies establish a presence in the metaverse with its own 3D engine. Unity plans to be instrumental in shaping the metaverse and is already popular with content creators as the company helps them monetize their content.
- Nvidia (Nasdaq: NVDA) – The metaverse will need enormous computing power, and Nvidia’s chips are expected to play a critical role. Nvidia is already a leader in gaming, and the company offers Nvidia Omniverse, a platform for connecting 3D worlds into a shared virtual universe. Omniverse can be used for collaboration in the design and creation of digital twins, simulation of real-world buildings and factories, and many other metaverse applications.
- Matterport (Nasdaq: MTTR) – The metaverse as an online-only world, requires a digitized copy of the real world. Matterport is able to create and deliver this data. The company combines everything needed to digitize buildings and objects. Matterport is currently creating the largest digital library of spatial data and information in the world. The company makes this data available through a powerful API.
- Tencent (SEHK: 700) – Online games and entertainment will be an essential part of the metaverse. Few other technology companies can offer their users such a comprehensive lifestyle online ecosystem as China’s Tencent. Tencent, with its dominance in online entertainment, from social networks to gaming, messenger services, fintech and e-commerce, will undoubtedly benefit from the transition to the metaverse.
- Microsoft (Nasdaq: MSFT) – Satya Nadella, CEO of Microsoft, recently unveiled his vision of an “enterprise metaverse”. With the Microsoft Enterprise Metaverse, the company plans to integrate the Internet of Things (IoT), digital twins and mixed reality to expand its dominance in the enterprise software market. In addition, Microsoft has a strong presence in the gaming sector with Minecraft, a game similar to Roblox that resembles a metaverse. The Xbox brand could also give Microsoft an entry into the Metaverse economy.
- Apple (Nasdaq: AAPL) – Apple has not directly addressed its own metaverse ambitions, but Apple CEO Tim Cook has spoken positively about augmented reality on several occasions. Apple has been unique in its ability to unite hardware and software. This could also be a competitive advantage in the metaverse. The company is already working on VR / AR headsets, so it is well positioned to benefit from the virtual and augmented reality of a metaverse.
- Disney (NYSE: DIS) – Walt Disney Chief Technology Officer Tilak Mandadi has spoken publicly about Disney’s long-term vision for a Disneyland metaverse. It’s all about connected park experiences that transcend physical and digital boundaries and open up new storytelling possibilities. This “theme park metaverse” will use wearables, smartphones and digital access points to merge physical and digital worlds.
- Gaming stocks – Probably no one would have expected a few years ago that the next generation of the internet would emerge significantly from the gaming industry. But the technology behind video games and 3D engines is the basic building block of the metaverse, and major developer studios will be instrumental in making it happen. Gaming stocks are therefore, in large part, metaverse stocks at the same time. Video game developers such as Electronic Arts, Activision Blizzard, Take-Two Interactive, Nintendo or CD Projekt, for example, will most likely benefit from a metaverse.
Although the metaverse is currently still rather a vision, it is already possible to invest in metaverse stocks and participate in the emergence of the next generation of the internet. However, investors who prefer to invest in ETFs, instead of direct investments in metaverse stocks, do not have much choice at the moment. There are numerous ETFs that invest in the relevant gaming stocks and technology stocks, but pure metaverse ETFs are still rare.
However, there is one dedicated fund, the Roundhill Investments‘ Metaverse ETF (META). The Metaverse ETF invests in companies that are either already building the metaverse or are in a position to do so in the future. The focus is on companies that are developing the infrastructure essential to the metaverse, 3D engines for creating virtual worlds, and pioneers in content, commerce and social for the metaverse. The largest positions in Roundhill Investments’ Metaverse ETF currently are:
|4.76%||TENCENT HLDGS LTD||700 HK|
|4.32%||UNITY SOFTWARE INC||U|
|3.92%||TAIWAN SEMICONDUCTOR MFG LTD||TSM|
|3.52%||AMAZON COM INC||AMZN|
The idea behind the metaverse is to digitally replicate and extend the real world. Those who want to participate will have the opportunity to exist, work and also shop in the metaverse, but in a three-dimensional virtual world. This includes equipping one’s own avatar with digital items, investing in digital real estate or renting a virtual apartment, using services or simply playing games. Just like in the real world, much of this will have to be paid for.
However, payments in the metaverse will not be made in USD or EUR, but in cryptocurrencies or digital currencies. Cryptocurrencies are already a reality and ubiquitous. The best example is, of course, Bitcoin. However, blockchain projects such as Ethereum or Solana are also extremely popular. Besides the well-known cryptocurrencies, there are crypto projects that focus on infrastructure and payment processing in the metaverse. However, this sector is very volatile and I therefore deliberately do not mention any examples. Verifiable ownership of digital goods and cryptocurrencies will be an essential part of the metaverse.
NFTs (Non-fungible tokens)
Virtual goods are nothing new in video games. For years, players have been competing for the most popular items and weapons in online games such as World of Warcraft and the like. These digital goods not infrequently serve as prestige objects and in many cases can enhance the digital avatar. But, while virtual goods in video games are partially tradable, there is still a problem. There is no ownership of these digital goods. In most cases, the rights and ownership lie with the game developers, not with the players who own these goods. If a game is discontinued or the server is shut down, these goods are often useless as well.
Non-fungible tokens, or NFTs, significantly change ownership, possession, and the way virtual goods are traded. An NFT represents an intangible digital item such as an image, a video, or an in-game item in a video game. The owners of NFTs are recorded on the blockchain so that an NFT can be traded as a substitute for the digital asset it represents. This greatly simplifies the trading of digital assets. It is likely that virtual objects in the metaverse will also be represented by non-fungible tokens.
NFTs therefore offer the prerequisite for securing property rights in the metaverse. Conceivable examples are ownership of virtual real estate, buildings, objects or achievements in the metaverse. NFTs are already being actively traded today, in some cases for millions of dollars. Examples include CryptoPunks, CryptoKitties or Bored Apes. Non-fungible tokens have established themselves as an investment object, similar to art or collectibles. However, it is important to distinguish between sensible investment and speculative hype.
Conclusion: Investing in metaverse stocks, cryptocurrencies and NFTs
The metaverse is still at a very early stage and is still far from becoming a reality. But there are already clear visions of how a metaverse should look and function. Companies around the world are investing billions to become a part of this megatrend. Of course, there are a lot of risks and there is always the possibility that a “real” metaverse will not prevail. It is important to diversify your assets and not put all your eggs in one basket when investing in the metaverse. Therefore, diversification and risk management are key when investing in the metaverse megatrend.
Investors looking to invest in the next generation of the internet have a variety of metaverse stocks to choose from. Sectors of interest include social media, digital payment processing and gaming. The major tech companies are also investing heavily in the Internet 3.0, but offer more downside protection through diversification into many other areas of daily life. Significant opportunities, but also very high risks, are offered by cryptocurrencies and NFTs (non-fungible tokens). If you want to invest in these, however, you should do comprehensive due diligence in advance about the respective projects and only invest money that you are willing to lose.