Enter the metaverse: an $8 trillion opportunity?

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Are you ready to enter the metaverse?

Trading the metaverse

What is the metaverse?

You’re probably aware by now that Facebook’s parent company has changed its name to Meta. In its Q3 earnings release, the social media conglomerate said it was now pushing ahead with creating a metaverse – but what does this actually mean?

A very quick definition of the metaverse is it combines the digital and physical worlds through the use of augmented and virtual reality technology. It’s basically a blurring of the internet with everyday life; a highly immersive virtual world where people gather to socialise, play and work.

The metaverse is a new frontier. Really, it’s a bit of a buzzword at the moment. However, it does present some potential major investment opportunities as it develops into a tangible concept.

Morgan Stanley values this new sector’s potential as an $8 trillion investment and trading opportunity. Tech is where the big bucks are these days – you only have to take a look at Apple’s latest earnings to see that – but $8 trillion is huge by anyone’s standards.

So, how can people go about investing in the metaverse?

Making headway into the metaverse

In a note published by Morgan Stanley on Tuesday, November 16th, as reported by CNBC, Brian Nowak, an analyst at the investment bank, said: “The metaverse is most likely to be a next-generation social media, streaming and gaming platform. And like current digital platforms, we expect the metaverse to initially and primarily operate as an advertising and e-commerce platform for offline products/purchases.”

The most obvious route into this new technology space is Meta. The Facebook parent has been the most vocal about pursuing this blurring of the digital and the physical.

“We remain positive FB primarily because of the still under-appreciated core business growth durability and free cash flow into ’22,” Nowak said. “This is even through an estimated $13.6bn of investment in the metaverse in 2022 to build the next generation version of social networking.”

In addition to Meta/Facebook, Morgan Stanley also earmarked the below stocks, each with an overweight rating, as potential metaverse inroads:

  • Roblox
  • Alphabet
  • Snap
  • Unity Software

Google parent Alphabet is a bit of a no brainer. The company is already one of the world’s foremost technology developers. It makes sense that it wants to grow its offer into VR spaces and other meta tech areas.

Morgan Stanley said Alphabet “has leading traffic, compute power, engineering talent and a growing focus on augmented reality. If we believe in next-generation platforms [Alphabet] should not be missed.”

The bank also noted that Snap is already a market leader in augmented reality technologies. Think of the bewildering level of filters and in-camera options available on the company’s Snapchat platform. Snap is already fairly ahead of the game, but the technology could be adapted for other parts of life than just social media and fancy photographs.

Think in-glasses heads-up displays, similar to the failed Google Glass experiment, giving you local weather updates, entertainment information, shopping highlights and so on.

According to a BBC report, some Snap content creators had been given augmented-reality focussing glasses in May to help test and popularise the technology.

Roblox is a video game company that specialises in virtual reality gaming. The brand has over 47 million daily users. If it can leverage those into metaverse’s potential for advertising, eCommerce, and social aspects, then Morgan Stanley thinks RBLX could be a major meta player.

“Like FB, what we like most about RBLX is that the core growth and monetisation algorithms (aging up, global growth, in-app spend) also remain strong,” Brian Nowak said.

Unity Software is also a key part of the video game industry’s virtual reality segment, only rather than making games like Roblox, it provides development software to other creators. Based on this, Morgan Stanley believes Unity could be able to springboard into the 3D graphics space integral to meta visual development.

“In a scenario where the metaverse attracts large numbers of content creators beyond gaming (e.g., to build virtual stores, 3D models of homes etc.), we believe U could serve as a true ‘picks and shovels’ business for an audience beyond (and including) its current core of game developers and artists,” said Nowak.

The metaverse is still in its embryonic stage, but there is the potential to get in on the ground level for traders and investors alike. Of course, it goes without saying that investing and trading in the aforementioned meta stocks carries all the usual risks. Only invest or trade if you can afford to take any losses and do your research prior to committing any capital.