What are metaverse stocks? They’re all to do with this digital, three-dimensional, immersive, real-time, interactive, social and commercial online thing that’s apparently going to revolutionise our lives.
The key companies at the forefront of it are the likes of Meta Platforms. And for those who don’t know, Meta Platforms is Facebook with a new name. There are plenty more, which share one thing in common — their stock prices have slumped.
The Twitter market cap has fallen to $29bn, for example. That’s a fair bit less than the $44bn Elon Musk agreed to buy it for. He’s currently trying to back out of the deal for unrelated reasons.
Nasdaq shares in general have fallen, with investors dumping them in the wake of the global economic crisis. But I think that might make it a great time to invest in metaverse shares now.
Graphics expertise
Nvidia is an interesting boom-and-bust example. It soared in 2021 when metaverse stocks were hot. But it’s plunged 48% since the start of 2022.
Nvidia has developed a metaverse platform. Called Omniverse, it should support all sorts of AI and 3D graphics applications. Nvidia’s dominance in the computer graphics business means it should hopefully have the technology to make a success of it.
Graphics chips and cards also give it a bit of a safety buffer, I think. And I reckon a forecast price-to-earnings (P/E) ratio of under 40 could soon look good value among metaverse stocks.
Financial clout
Investors often tout Microsoft as a good metaverse stock, based partly on its HoloLens headset product. But I think that’s looking at it too narrowly. It’s into gaming too, with its planned acquisition of Activision Blizzard expected to complete soon.
But above all else, Microsoft powers a huge amount of the world’s computing and server platforms. And it has the financial muscle to simply acquire smaller companies that come up with good metaverse-related ideas.
More metaverse stocks
High-tech investors have their eyes on a bunch of other companies with metaverse attraction. This includes Roblox with its video game platform.
Autodesk already has a sizeable customer base, offering professional graphics design tools. It seems an obvious next step for it to exploit the 3D interactive capabilities that the metaverse should offer.
And then there’s Cloudflare, on people’s minds due to an unfortunate glitch that briefly took down a portion of the internet a few weeks ago! Cloudflare manages distributed data services, and is also growing its cybersecurity presence.
What are the risks?
I’ve not mentioned specific risks with any of these, and they do exist. Valuations are often high, and stock prices can be very volatile — I wouldn’t buy if I couldn’t handle short-term losses.
But my overriding concern comes from Warren Buffett. He’s reminded us on several occasions that it’s often not the pioneers in a new technical field who go on to make the big money. In another 20 years, I wonder how many of today’s metaverse hopefuls will still be around.
Saying that, I do think I see some good buying opportunities for investors right now.