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Published: Mar 15, 2022 11 min read
Photo illustration of a woman using a virtual reality headset with an illustrated graph superimposed on top
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When Mark Zuckerberg announced his company was changing its name from Facebook to Meta late last year, he was met with a range of reactions, from mockery and skepticism to confusion and praise.

But to Zuckerberg, the reason was clear: "The metaverse is the next frontier in connecting people, just like social networking was when we got started," he wrote in a founder's letter at the time. With the creation of Facebook, the tech CEO proved he understands how people will want to communicate and interact with one another in the future. If he's right about the metaverse, our physical world will likely start merging even more with our digital one.

Zuckerberg isn't the only one betting on the metaverse. Companies like Apple and Microsoft are investing in the next frontier of the internet as well. Experts say it will be transformative.

"People should ask not what will the metaverse change but what won't it change," says Zeno Mercer, research analyst at ROBO Global. "There's not much that it won't change."

If you're looking to invest in the metaverse, here's where experts say to start.

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What is the metaverse?

"Metaverse" is a major buzzword, but if you don't understand what the metaverse actually is, there's good reason for that: There is no clear-cut definition, or even a consensus on whether or not it already exists.

But the overarching theme is that the metaverse is a virtual world in which users can do what they do in the physical world, like work, buy and sell goods and socialize with friends. While some say that the metaverse already exists in the form of video games, others say the metaverse doesn't exist yet, and will marry technologies in a way we haven't yet seen to bring people into virtual worlds. Tons of companies are working on building the metaverse, and it's unclear what the outcome will look like. It could include companies competing against one another to create the one definitive metaverse, or companies could work together to create various metaverses in which your avatar can move from one company's platform to another.

The idea isn't new. In fact, author Neal Stephenson is credited with coining the term in 1992 in his sci-fi novel "Snow Crash." But since then, the way individuals and companies envision the metaverse has continued to evolve.

The company Meta, for example, calls the metaverse "a set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you."

Think of it this way, instead of opening up your laptop and shopping online or chatting with friends, the metaverse is a way to actually "live" in a virtual world — possibly via an avatar, or with virtual reality (VR) goggles that make you feel like you're physically elsewhere — where you can create various communities and interact with others more so than you do via Facebook or Instagram.

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3 ways to invest in the metaverse right now

There are many companies hoping to help build the metaverse, from chipmakers to gaming companies. Here are the areas experts say to keep an eye on if you want to invest in the metaverse.

Gaming

Gaming companies are likely to be large beneficiaries of the transition to the metaverse, especially because they're already well on their way to fulfilling opportunities related to the concept, says Scott Kessler, global sector lead of technology, media and telecommunications at Third Bridge.

When Microsoft announced its plans to acquire gaming company Activision Blizzard for a whopping $68.7 billion earlier this year, the company's CEO Satya Nadella said in a news release that, "Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms."

The acquisition is just one of many in the gaming world, which include Take-Two Interactive's buying of Zynga (creator "Farmville" and "Words with Friends") and Sony's plan to buy Bungie (developer of popular video games like "Halo" and "Destiny").

While many businesses are just getting started with their plans to build the metaverse, gaming companies have been working on an early version for years, given their ability to allow gamers to interact with one another in a virtual world, and their virtual economies that traverse into the real world. A survey published more than a decade ago from Visa's PlaySpan and research firm VGMarket found that even back then, nearly one out of every three gamers had used actual money on virtual goods.

Another big U.S. company in this space is Electronic Arts, which boasts a portfolio of well-known games like "FIFA" and "The Sims."

Gaming platform Roblox is also making strides in the race to the metaverse. Roblox, which is very popular among kids, has already created a virtual world that allows users to play a variety of games and interact online, and is one of the companies that seems to be closest to capturing what people think of when they envision the metaverse, Kessler says.

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Infrastructure

The metaverse is more of a long-term vision, says Angelo Zino, senior industry analyst at CFRA Research. Many of the ideas companies are throwing money into won't actually come to fruition for years. So if you want to buy stocks in companies supporting the metaverse today — or, at least over the next few years — your best bet is investing in infrastructure that needs to be in place for these new innovations to actually be developed, Zino says.

Semiconductor companies Nvidia and Advanced Micro Devices are probably the best positioned, he says, as they'll actually likely see revenue increases as companies like Meta spend money on infrastructure.

The graphics processing units these companies manufacture — which can process a ton of data simultaneously and are used for machine learning and gaming, among other applications — are already major players in gaming and 3D simulation.

Qualcomm could also be a metaverse beneficiary as more hardware devices come out that get consumers excited about virtual and augmented reality (AR), since the semiconductor produces chips that power AR and VR headsets, Zino adds.

There are also software companies that are enabling other businesses to build the metaverse, like Unity Technologies, Kessler says. Unity is a video game software development company whose software is now being used beyond gaming, including for film animation.

Autodesk and Trimble are two more software companies looking to help build the metaverse, Mercer says. Autodesk is a software company that creates programs for engineers and architects to build products with AR and VR tools.

Trimble, meanwhile, offers 3D modeling for construction and an AR app.

Big tech

Meta (formerly Facebook) can benefit from being a first mover in the metaverse space, says Ali Mogharabi, senior equity analyst at Morningstar. The company has the access to capital to invest aggressively in the metaverse, thanks to the revenue it brings in from Facebook and Instagram. It also has the users.

"In order for the metaverse to be successful, you need those users out there to interact and engage with one another," Mogharabi says.

In Zuckerberg's letter, he wrote that Meta's role in helping to build the metaverse will be to accelerate the development of "fundamental technologies, social platforms and creative tools to bring the metaverse to life, and to weave these technologies through our social media apps." While it's unclear exactly what that might look like, Mogharabi says by expanding into the metaverse, Zuckerberg and his company are opening themselves up to more opportunities keep users on its platforms, as well as for monetization, whether it be through selling items on virtual platforms or marketing and advertising on virtual platforms.

Apple is another tech giant that is looking to benefit from the shift in interest towards the metaverse, Zino says. The company is focused on AR technology and is expected to launch a mixed-reality headset.

"Apple has always been the company that has helped adoption," Zino says. Just take a look at smart phones, and larger-screen devices, he adds. "No one really cared about larger-screen devices until Apple had it... Nobody really cared about 5G until Apple made it a reality."

And More

The metaverse is still a huge unknown, so its possibilities are endless, Zino says. Companies that touch on everything from tools for bettering mental health to virtual office experiences may be able to benefit from the growing interest in a virtual world.

He points to Snap as a potential metaverse beneficiary on the social media side, as it caters to consumers who will ultimately drive the adoption of the metaverse — users under the age of 35 — and has already launched AR glasses.

And as we become more digitally dependent, we're going to need better ways to prove our identities.

"Cybersecurity is a huge component that is an underrated angle of the applications of the metaverse," Mercer says. Companies like Cloudfare, which protects companies against cyber attacks, and Norton, which offers identify theft protection are two that could benefit, he adds.

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