In this article we present the list of 10 Stocks That Will Own the Metaverse. Click to skip ahead and see the 5 Stocks That Will Own the Metaverse.
Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA), and Alphabet Inc. (NASDAQ:GOOG) are three companies the smart money is betting big on that should one day own the metaverse, which has the potential to be one of the most lucrative ventures in human history.
There’s no simple way to define what the metaverse is or will be, but a broad definition could describe it as a collection of virtual worlds in which people interact with each other through avatars. And while the delivery mechanisms could be many, a true metaverse experience is seen as one which will use VR headsets, sensors, and haptic feedback to completely immerse the user in a 3D world.
While the metaverse is most commonly associated with gaming, it has the potential to transform and play a role in nearly every facet of our lives, from how we work and conduct business, to how we socialize, consume entertainment, and spend our money. Rudimentary examples of metaverses already exist, primarily in the form of gaming type experiences like Roblox (primarily because of the presence of live events on the platform, which other online games like Fortnite have also hosted) and Meta Platforms’ Horizon Worlds (a more focused, though early-stage attempt at a true metaverse experience).
What differentiates a metaverse from a traditional online video game, which otherwise has many of the same elements, is the broad real-life applications that a metaverse could offer. Socializing, work, education, live events, or conducting metaverse-related business all figure to feature prominently in these worlds. Entire economies are expected to spring up within these worlds that will actually lead to real-world, but metaverse-based jobs, such as game designers, visual architects, and fashion designers, and virtual land owners (and landlords?).
We’re already seeing some astounding prices being paid for virtual property in games like The Sandbox, where more than $1 million was spent on virtual land so those owners could digitally live near Snoop Dogg. As more and more celebrities and influencers start heading into the metaverse, these scenarios will continue to magnify, with people spending huge sums to live near celebrities and making large sums if they can get celebrities to endorse their metaverse clothing or other creations.
It’s that kind of real-world imitating economic backdrop, and the ability to otherwise conduct actual real-world business through the platform that has prognosticators so excited about the growth potential and future scope of the metaverse, which could be worth trillions of dollars.
While the extreme ends of that growth aren’t likely to be felt any time soon, as the technology simply isn’t there yet (and likely won’t be for many years to come) to create a truly immersive metaverse, the market is nonetheless expected to grow at a very impressive 39.4% CAGR through 2030.
If you believe in the long-term growth potential of the metaverse and are looking for some stocks to invest in that should be among the leaders in the space, you’ve come to the right place. The following list of top metaverse stocks is based on the latest shareholder data from a collection of some of the best investors in the world.
Photo by mahdis mousavi on Unsplash
The following metaverse stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
10 VR Stocks That Will Own the Metaverse
10. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Shareholders: 23
Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA), and Alphabet Inc. (NASDAQ:GOOG) are three names most likely to own the metaverse in the years and decades to come. Another company that will have a big role to play in the metavolution is Unity Software Inc. (NYSE:U).
With gaming and immersive graphical experiences being core to the metaverse experience, 3D development platforms like Unity Software Inc. (NYSE:U)’s will be key to building the backbone and eye candy that will shape our digital futures. Unity is already making money from such endeavors, in addition to standard video games, pulling in $617 million in revenue in the first half of this year. The company is poised to merge with app monetization company ironSource, with a shareholder vote on the issue taking place on October 7. That should give the company and its content creators even more effective means of making money from their creations, be they meta-related or otherwise.
Unity Software Inc. (NYSE:U) crashed to a new low in hedge fund ownership during Q2 following a 41% drop in the number of funds long the stock. Greg Eisner’s Engineers Gate Manager and Nehal Chopra’s Ratan Capital Group were some of the funds that sold out of Unity during the second quarter. Jim Davidson, Dave Roux, and Glenn Hutchins’ Silver Lake Partners has more than 10% exposure to Unity in its 13F portfolio, owning just under 35 million shares.
The ClearBridge Investments All Cap Growth Strategy was buying shares of Unity Software Inc. (NYSE:U) during the first quarter, explaining why in its Q1 2022 investor letter:
“We took advantage of a correction in higher-multiple stocks early in the first quarter to purchase shares of Unity Software (NYSE:U), a leading platform to create, run and monetize 3D content. With about 1.6 million monthly active creators versus roughly 15 million potential content creators in gaming alone, we believe the company’s Create Engine is still underpenetrated relative to its core addressable market. We similarly see a long runway for growth in Unity’s Operate Solutions segment given its advertising network commands single-digit share of the $60 billion mobile app install ad market today. Furthermore, we believe Unity is well-positioned to expand its addressable market to include industries beyond gaming, on both the operate and create sides of their business (Exhibit 1). The company is not yet free cash flow positive but given strong net expansion rates and high gross margins, we see a path to improving profitability over time, with management notably targeting positive free cash flow this fiscal year.”
9. Sony Group Corporation (NYSE:SONY)
Number of Hedge Fund Shareholders: 26
Japanese electronics giant Sony Group Corporation (NYSE:SONY) is one of the biggest players in the metaverse at this point given the traction that its PlayStation-based VR headset has achieved, selling over 4 million copies worldwide. Sony recently partnered with English Premier League club Manchester City to recreate that team’s football stadium in the metaverse. Sony also sells sensors and other imaging technology that could be utilized by other companies engaged in the development of metaverse experiences.
26 of the hedge funds that are tracked by Insider Monkey’s database were long Sony Group Corporation (NYSE:SONY) on June 30, up 30% from three quarters earlier. Ben Jacobs’ Anomaly Capital Management initiated a position of 1.65 million Sony shares during Q2, giving its 13F portfolio 6.81% exposure to the company.
Cooper Investors discussed Sony Group Corporation (NYSE:SONY)’s role in the burgeoning music rights landscape in the fund’s Q4 2021 investor letter:
“In recent years we have observed a growing market for music rights which represent another way for owners of record labels and music libraries like portfolio holdings Warner Music Group and Sony (via its subsidiary Sony Music, ~25% of our estimated enterprise value) to deploy capital, grow their businesses and create value for shareholders.
In the first few days of 2022 Warner closed a deal to acquire David Bowie’s back catalogue for about US$250m which follows on from Bruce Springsteen’s catalogue sale to Sony for upwards of US$500m and Bob Dylan’s sale to Universal Music for a similar amount.
The trend in demand for music copyrights is clearly strengthening, with competition for these assets coming from traditional music companies (Warner, Sony) as well as specialist investors and private equity…” (Click here to see the full text)
8. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Shareholders: 38
Roblox Corporation (NYSE:RBLX)’s eponymous mobile game is one of the earliest examples of a metaverse in action, as the game features a collection of virtual worlds and activities created by millions of different content creators that can then be engaged with by players, a small number of whom exist within the environment at the same time and can interact with one another. Players can also buy fashion items and accessories for their avatars, allowing them to develop a unique look that sets them apart from other players’ avatars.
In addition to the millions of standard game and hangout rooms, Roblox has also played host to several live events, including live concert experiences from renowned artists like The Chainsmokers. However, the limitations and annoyances of the Roblox platform can somewhat obscure the immense promise of what the metaverse could be, as you’re constantly bombarded with popup ads and gaudy in-experience ads trying to sell you stuff at all times. Despite that, Roblox had nearly 60 million daily active users in September, showing how popular shared virtual worlds not only could be, but already are.
Hedge funds have bailed on Roblox Corporation (NYSE:RBLX) over the past two quarters, pushing ownership of the stock down by 38%. Some of the eponymous game’s biggest bulls were doubling down on the stock during Q2 however, as Jim Simons’ Renaissance Technologies, Cathie Wood’s ARK Investment Management, and Ken Griffin’s Citadel Investment Management all raised their stakes in the company. The three funds own more than $750 million in RBLX shares as of June 30.
Jefferies Group discussed Roblox Corporation (NYSE:RBLX)’s potential opportunities and pitfalls with its Metaverse game in the fund’s Q3 2021 investor letter:
“If we look at the Metaverse concept with more lenient guidelines for interoperability, then it becomes easier to see why certain companies are being referred to as Metaverse. On the virtual side, we’d point to companies like Epic Games, TakeTwo and Roblox. In augmented reality, it would be Niantic and SNAP. These are the large capitalized players in the space but albeit, not the only ones. We expect new mulit-billion dollar companies will rise as the
Metaverse becomes more mature.
Roblox is a good example. The content is almost entirely user generated, the engine that powers the developer studio is provided by Roblox and developers/creators share in almost all the money that users spend on the platform. In addition, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox actually has a lot of the pieces for our utopian definition of Metaverse, but things like technology, interoperability with outside platforms and a dynamic, two-way economy are what’s missing. However, given our thesis that full interoperability is somewhat unrealistic, it’s easy to see how Roblox fits the definition…
Many already consider RBLX a Metaverse, or at least an early iteration of one, and here’s why. The platform offers all the tools required for content creation in a low-code / no code format and handles publication, language translations, billing, collections, safety and security of the environment and more. It’s hard to find a platform that makes the creative process easier for developers than Roblox; we see this as very supportive of creator economy.
The content is almost entirely user generated and developers/creators share in almost all the money that users spend on the platform. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. Lastly, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. In essence, the RBLX ecosystem includes creator economy, a virtual platform, picks and shovels of the Metaverse and some interoperability – many of the key enablers for Metaverse.
However, there’s always work to be done. We would expect to see a more dynamic economy emerge with resale moving beyond limited items and premium members, particularly with newer gaming models such as play-to-earn. Increasingly, gamers are going to want some return for the time and money invested on a platform. Advancements in technology will allow for truly shared experiences among a larger and larger group of people. We remain skeptical on the reality of interoperability; RBLX could very well end up being one of many Metaverses.”
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Shareholders: 66
Chipmaker Intel Corporation (NASDAQ:INTC) will be another major player powering the metaverse in the future. Yet while the company is optimistic about its potential, it also believes we’re a long way away from true metaverse experiences, where thousands or even millions of people could all exist within the same shared world at the same time rather than being walled off into tiny instances of a world that support only a limited number of users.
In an editorial posted to the company’s website, Intel Corporation (NASDAQ:INTC) senior vice president and head of the company’s Accelerated Computing Systems and Graphics Group, Raja Koduri, believes we’ll need to achieve a 1,000-fold increase in computing power before true metaverses will be possible.
For its part, Intel is going all-in on chipmaking again, perhaps with an eye on owning the metaverse, as the company recently announced plans to spin off its autonomous driving unit Mobileye.
Hedge fund ownership of Intel Corporation (NASDAQ:INTC) has fallen by 23% since peaking at the end of the first quarter of 2021, including one of its steepest drops in smart money ownership during Q2. David Einhorn’s Greenlight Capital and Rob Citrone’s Discovery Capital Management were two prominent hedge funds that sold out of Intel during the quarter.
Baron Funds explained why Intel Corporation (NASDAQ:INTC) has failed to perform like some of its dot-com era peers in the fund’s Q2 2022 investor letter:
“Then, there is the case of Intel Corporation (NASDAQ:INTC). A blue-chip tech champion with a market capitalization of over $500 billion in early 2000, the stock was trading at a P/E multiple of 42. It was a fast-growing company whose stock price and multiple declined more or less in line with its peers. However, unlike Google, Intel’s net income has grown from $7.3 billion in 1999 to $19.9 billion in 2021, a compounded annual growth rate of just 4.7%. Its growth from the dot com era has not proven to be durable, and Intel has yet to trade at the price it attained in 1999.”
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Shareholders: 71
Closing out the first half of the list is another chipmaker, QUALCOMM Incorporated (NASDAQ:QCOM). While the company is best known for powering many of the world’s mobile devices with its Snapdragon processors, it’s angling to be one of the leading players in the metaverse as well. The company recently partnered with Meta Platforms to build novel VR and AR experiences utilizing custom Snapdragon XR platforms.
QUALCOMM Incorporated (NASDAQ:QCOM)’s venture capital arm has also deployed $100 million into a Metaverse fund to support the development of the metaverse ecosystem, specifically those that use the company’s XR platform. Those experiences won’t just be gaming-related, but will instead encompass everything from the health and wellness field, to education and entertainment.
Hedge fund ownership of QUALCOMM Incorporated (NASDAQ:QCOM) is also down by 23% from its peak, which was achieved in the third quarter of 2020. There’s also been a decline in smart money shareholders of QCOM during six of the past seven quarters. Michael Rockefeller and Karl Kroeker’s Woodline Partners and Paul Tudor Jones’ Tudor Investment Corp are among the funds that sold off their Qualcomm holdings during Q2.
The ClearBridge Investments Large Cap Value Strategy likes QUALCOMM Incorporated (NASDAQ:QCOM) opportunity to expand out from its strong mobile base, as outlined in the fund’s Q4 2021 investor letter:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
Meta Platforms, Inc. (NASDAQ:META), NVIDIA Corporation (NASDAQ:NVDA), and Alphabet Inc. (NASDAQ:GOOG) will be major metaverse players in the decades to come. See where they rank among hedge funds today by clicking the link below.
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Disclosure: None. 10 Stocks That Will Own the Metaverse is originally published at Insider Monkey.