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The future of the internet is set to include virtual worlds where individuals can interact without the constraints of physical space. Welcome to the era of the metaverse. Analysts predict that these virtual environments may present the next significant investment opportunity.
While the metaverse is still in the process of evolving, the technology has the potential to transform various aspects of life, from e-commerce to social media and even real estate. As the audience for these virtual worlds expands, so does the interest from businesses seeking to capitalize on this emerging trend. For example, Facebook rebranded itself as “Meta” and has invested over $40 billion since 2020 in developing the metaverse.
This guide aims to provide you with a better understanding of what the metaverse is and how you can potentially benefit from this technology.
What is the metaverse?
Over the past few decades, internet technology has revolutionized how we perceive the world, offering us unrestricted access to information and broadening our social interactions. The next phase of technological advancement is likely to be more immersive.
Through advancements in computing power, faster internet connectivity, and innovations like artificial intelligence and machine learning, tech companies can create virtual environments. These spaces are designed to give participants a sense of presence without physically relocating. By utilizing holograms powered by virtual reality headsets or similar devices, companies such as Meta aim to offer individuals the opportunity to “do almost anything you can imagine,” as Meta CEO Mark Zuckerberg described in a 2023 video.
Individuals can transport themselves as avatars to virtual realms to work, socialize, shop, exercise, learn, and engage in various life activities digitally within this futuristic world. Users can replicate real-world elements like their home or office decor while incorporating advanced graphics such as a Hawaiian beach. By blending the imaginary with the real, virtual reality is idealized, as articulated by Meta.
“When you are in a meeting in the metaverse, it will feel like you are in the room together, making eye contact, sharing a sense of space, and not just staring at a grid of faces on a screen,” Zuckerberg explained.
This sense of immersion transcends all experiences within virtual worlds. For instance, a teacher could transport students to ancient Rome or the depths of the Amazon Forest through augmented reality, an enhanced version of the physical world.
Investing in virtual worlds: What does the market look like?
It’s essential to recognize that virtual worlds are not a novel concept. Companies like Nintendo, Decentraland, The Sandbox, and Roblox (RBLX) have been operating virtual reality spaces for years, collectively attracting millions of users. However, for major tech companies, the stakes are high as they strive to unite these communities into a cohesive metaverse. With this objective, they also seek to capture a portion of the billions of dollars at stake.
Investment firm Grayscale projects that global revenue from virtual gaming alone could exceed $400 billion by 2025, up from $180 billion in 2023, representing a 122 percent increase.
“Our social lives and gaming are converging and creating a large, fast-growing virtual goods consumer economy,” analysts at Grayscale noted in a research report.
Content creators and other participants utilize cryptocurrencies to trade virtual goods within the metaverse economy. “This new paradigm enables users to own their digital assets as non-fungible tokens (NFTs), exchange them with others in the game, and transfer them to other digital experiences, establishing an entirely novel free-market internet-native economy that can be monetized in the physical world.”
Several major companies are entering the fray. Art auction house Sotheby’s (BID) reported in 2023 that NFT sales surpassed $100 million and launched Sotheby’s Metaverse, a new virtual gallery in Decentraland where visitors can view available digital artworks. Likewise, Nike announced an expansion of its digital presence in December 2023 through the acquisition of RTFKT, a virtual sneaker company. High-end fashion brands like Givenchy, Gucci, Dolce & Gabbana, and Adidas have hosted virtual fashion shows in the metaverse.
Furthermore, popular musicians such as Ariana Grande and Lil Nas X have held virtual concerts in the metaverse, attracting millions of fans worldwide. The metaverse economy is also creating new opportunities in real estate. Some investors have paid millions for “digital land” on metaverse platforms like The Sandbox, hoping to reside near celebrities like rapper Snoop Dogg.
How to invest in the metaverse
Many individual investors likely already have exposure to the metaverse, as numerous large U.S. public companies are either actively involved or considering investments in the technology.
In a major gaming deal in October 2023, Microsoft (MSFT) acquired Activision Blizzard for $69 billion, signaling a significant bet on the expansion of the metaverse. “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,” stated Microsoft CEO Satya Nadella.
Other public companies, such as NVIDIA (NVDA), a semiconductor company powering computer graphics, could also play a role in the metaverse’s growth. Similarly, Autodesk (ADSK) and Unity Software (U), software providers enabling architects and designers to create 3D models, as well as cloud technology provider Fastly (FSLY), are prominent names in the field.
For those seeking broader exposure, the Roundhill Ball Metaverse ETF (METV) offers a convenient and straightforward way to invest in metaverse-specific stocks. The fund has approximately $386 million in net assets under management and carries an expense ratio of 0.59 percent.
Additionally, many investors hold cryptocurrencies, NFTs, and other digital assets within the metaverse ecosystem. However, these investments often come with increased risks and volatility compared to traditional holdings. Therefore, it’s crucial to assess your risk tolerance, conduct thorough research, and be prepared for potential losses. Maintaining a diversified portfolio with a mix of solid investments is typically a prudent approach for most individuals.
Bottom line
The metaverse represents a rapidly expanding technology with the potential to transform industries and offer new investment prospects. As an individual investor, you may already have exposure to the metaverse through investments in major tech companies or involvement in cryptocurrency and NFTs. Nonetheless, it’s crucial to conduct thorough research and evaluate your risk tolerance before delving into this emerging market. The future appears promising for the metaverse, making it a space worth monitoring as it continues to develop.
Editorial Disclaimer: All investors are encouraged to conduct their own independent research on investment strategies before making investment decisions. Additionally, investors should be aware that past performance of investment products is not a guarantee of future price appreciation.