In this article, we will take a look at the 11 best metaverse stocks to invest in.
When Facebook renamed itself to Meta Platforms, Inc. (NASDAQ:META) in a dramatic pivot to the metaverse technology back in October 2021, who’d have thought that in a matter of just a year Meta Platforms, Inc. (NASDAQ:META) would be forced to rethink its priorities. Announcing the shift, Mark Zuckerberg at the time said in a letter:
“Our hope is that within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce, and support jobs for millions of creators and developers.”
But a latest letter by Mark Zuckerberg paints a different picture. Meta Platforms, Inc. (NASDAQ:META), which recently announced huge layoffs and cost-cutting measures amid the challenging macro backdrop that is hammering ads business, seems not that excited about metaverse. The letter instead frequently mentioned AI. Here’s what Zuckerberg said in his March 2023 letter:
“Our single largest investment is in advancing AI and building it into every one of our products. We have the infrastructure to do this at unprecedented scale and I think the experiences it enables will be amazing. Our leading work building the metaverse and shaping the next generation of computing platforms also remains central to defining the future of social connection. And our apps are growing and continuing to connect almost half of the world’s population in new ways. This work is incredibly important and the stakes are high. The financial plan we’ve set out puts us in position to deliver it.”
The artificial intelligence mania ushered in after the launch of ChatGPT and the subsequent AI wars among major tech companies have jolted Meta Platforms, Inc. (NASDAQ:META) to its core. Some analysts even said the company might be “killing” metaverse projects to focus more on AI.
Is Metaverse Dead?
But does that mean metaverse has become irrelevant even before it reach actuality? The answer is a resounding no. Major companies, including Meta Platforms, Inc. (NASDAQ:META), are heavily investing in metaverse, which includes augmented reality, virtual reality, extended reality and even AI. Analysts believe the confluence of AI and metaverse in the future could create new opportunities.
The hullaballoo around AI shouldn’t let you think that metaverse is a relic of the past. In fact, spending in the sector is thriving.
Forrester recently surveyed 903 executives and found out that 46% of consumer brand marketers in the industry believe they will increase their metaverse budgets this year, while only 12% said they will spend less.
Metaverse companies like Roblox Corporation (NYSE:RBLX) are seeing huge spending from marketers because the interactive nature of metaverse apps really brings results for companies. A Wall Street Journal report mentions several examples of companies seeing success with metaverse apps for marketing. For example, the Japanese cosmetics company Shiseido Co. received 41.9 million visitors at a Roblox Corporation (NYSE:RBLX) experience called “Nars Color Quest” it sponsored between July to October 2022. In another example, consumers on average spent seven or eight minutes playing games on Drest, an app on which users can sample 3-D virtual fashions.
According to WSJ, Dina Fierro, senior vice president of the Web3 and metaverse group at Shiseido Americas, explained the effectiveness of metaverse applications for marketing in these words:
“When you think about seven or eight precious minutes with a consumer and how lucky you are to get maybe six seconds of someone’s attention on a platform like an Instagram or a TikTok, I think it’s very easy to validate the theory that this is a qualitative engagement.”
Photo by mahdis mousavi on Unsplash
Methodology
For this article we scanned Insider Monkey’s database of 943 hedge funds and picked 11 metaverse-related companies with the highest number of hedge fund investors. We selected companies that make metaverse-related software or hardware and have significant presence in metaverse, AR, VR and extended reality domains.
11. Himax Technologies, Inc. (NASDAQ:HIMX)
Number of Hedge Fund Holders: 11
Himax Technologies, Inc. (NASDAQ:HIMX) stands to gain from the metaverse boom in the future because the company makes an important component that is used in head mounted displays or headsets. This component is liquid crystal on silicon (LCoS) microdisplays. Himax Technologies, Inc. (NASDAQ:HIMX) last year also showed its 3D SLiM (Structured Light Module) solution for metaverse applications. This device has a 3D vision processor and depth camera offering real time high frame rate and high accuracy.
In its November 2022 investor presentation, Himax Technologies, Inc. (NASDAQ:HIMX) said:
“Himax owns exceptional Optics, 3D Sensing, WLO and WiseEye AI solutions with mass production records. The diverse non-driver solutions fulfill different AR/MR/XR/VR metaverse related application needs in AR Displaying & Human Interface Sensing.”
11 hedge funds tracked by Insider Monkey had stakes in Himax Technologies, Inc. (NASDAQ:HIMX) as of the end of the fourth quarter of 2022.
10. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 29
Online gaming platform Roblox Corporation (NYSE:RBLX) offers a highly developed metaverse where players can create virtual words, socialize with each other and even shop. As of the fourth quarter of 2022, Roblox Corporation (NYSE:RBLX) has a whopping 58.8 million average daily active users (DAUs), up 19% from the prior-year quarter.
In March, Jefferies analyst Andrew Uerkwitz upgraded the stock to Buy from Hold and increased his price target to $48. The analyst likes Roblox Corporation (NYSE:RBLX)’s new creator features and said he’s “comfortable” the company will be able to grow through competition and macro pressures.
As of the end of the fourth quarter of 2022, 29 hedge funds tracked by Insider Monkey had stakes in Roblox Corporation (NYSE:RBLX). The most notable hedge fund stakeholder of Roblox Corporation (NYSE:RBLX) was ARK Investment Management of Catherine D. Wood which had a $241 million stake in the company.
9. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 32
Unity Software Inc. (NYSE:U), the company behind one of the most powerful and widely used gaming engines in the world, stands to benefit from the metaverse revolution. In 2021 Unity Software Inc. (NYSE:U) announced that it will buy the technology division of WetaFX, which is behind Lord of the Rings and Game of Thrones movie and TV franchises, in a $1.6 billion deal. The plan was to boost Unity Software Inc. (NYSE:U)’s immersive, AR and VR capabilities. Unity’s technologies are used by developers to make metaverse applications.
Earlier this month, it was revealed that Cathie Wood bought over 200,000 shares of Unity Software Inc. (NYSE:U). ARK Investment Management already owns a $314 million stake in Unity Software Inc. (NYSE:U) as of the end of the fourth quarter of 2022. Overall, 32 hedge funds tracked by Insider Monkey have stakes in Unity Software Inc. (NYSE:U).
8. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 40
Chinese search engine giant Baidu, Inc. (NASDAQ:BIDU) in December 2021 revealed its metaverse offering called Xi Rang, a virtual world and a set of tools that will allow developers to build metaverse applications. Xi Rang, which means “land of hope,” can be accessed via VR goggles or smartphones. Earlier this year Baidu, Inc. (NASDAQ:BIDU) talked about Xi Rang MetaStack at the company’s annual flagship developers’ conference. Similarly, it has also launched Baidu AI Cloud digital avatar platform XiLing, which is a platform-level product integrating digital avatar generation and content production.
In an interview with Forbes, Baidu, Inc. (NASDAQ:BIDU)’s vice president Ma Jie explained the company’s metaverse vision in the following words:
“We want to be like the Amazon Web Services (AWS) for the metaverse. It is closer to the infrastructure layer of today’s computing ecosystem.XiRang is an invisible platform. Creator City, a virtual world where we held our Developer Conference last year, is really just a showcase of XiRang’s abilities. We wanted to show developers that they can use XiRang’s tools, software and other capabilities to build their own virtual worlds. Our capabilities include avatar, movements and interactions, natural languages, multimedia display, and many more. We will build other capabilities such as cloud rendering to push the industry forward.”
A total of 40 hedge funds tracked by Insider Monkey were bullish on Baidu, Inc. (NASDAQ:BIDU) as of the end of the fourth quarter of 2022. The biggest stakeholder of Baidu, Inc. (NASDAQ:BIDU) is John W. Rogers’s Ariel Investments which owns a $326 million stake in the company.
7. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 106
NVIDIA Corporation (NASDAQ:NVDA) offers a dedicated platform that allows people to develop metaverse applications. The platform is called Omniverse. In March this year, NVIDIA Corporation (NASDAQ:NVDA) partnered with Microsoft Corporation (NASDAQ:MSFT) after which Microsoft Azure will host NVIDIA Omniverse Cloud to give access to developers who want to design, develop, deploy and manage industrial metaverse applications.
Insider Monkey’s database of 943 hedge funds shows that 106 hedge funds had stakes in NVIDIA Corporation (NASDAQ:NVDA), up from 89 funds in the previous quarter. This shows that hedge funds piled into NVIDIA Corporation (NASDAQ:NVDA) in the last quarter of 2022. The biggest stakeholder of NVIDIA Corporation (NASDAQ:NVDA) is David Goel and Paul Ferri’s Matrix Capital Management which owns a $741 million stake in the company.
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 113
Chinese Cloud and e-commerce giant Alibaba Group Holding Limited (NYSE:BABA) is offering several metaverse offerings. Alibaba Group Holding Limited (NYSE:BABA)’s Cloud platform offers special software features and tools to develop metaverse applications. Alibaba Group Holding Limited (NYSE:BABA) last year rolled out extended reality features for online shoppers to give them an immersive experience using digital avatars.
Alibaba Group Holding Limited (NYSE:BABA) shares gained recently after media reports suggested that regulators in China will reduce fines against Ant Group, Alibaba’s fintech arm.
Hedge funds were piling into Alibaba Group Holding Limited (NYSE:BABA) shares during the fourth quarter, as Insider Monkey’s database of 943 hedge funds shows that 113 hedge funds had stakes in the company, up from 105 hedge funds in the previous quarter.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Earlier this year, it was reported that Apple was working on a “mixed reality” AR headset which will allow users to have an immersive experience when using games, apps and software. According to Bloomberg, the headset will likely be named Reality Pro and could have a price tag of $3,000.
The device could be launched in June this year. The launch could cause metaverse developers to roll out several apps and games for Apple Inc. (NASDAQ:AAPL)’s headset, increasing Apple’s footprint in the industry.
As of the end of the fourth quarter of 2022, 135 hedge funds tracked by Insider Monkey had stakes in Apple Inc. (NASDAQ:AAPL). The biggest stakeholder of Apple Inc. (NASDAQ:AAPL) is Warren Buffett’s Berkshire Hathaway which owns an $116 billion stake in the company.
Here is what ClearBridge All Cap Growth Strategy has to say about Apple Inc. (NASDAQ:AAPL) in its Q1 2023 investor letter:
“Reminiscent of the FAANG period of market leadership in recent years, performance was concentrated in a handful of the largest growth stocks in the benchmark. For example, Apple (NASDAQ:AAPL), Microsoft (MSFT) and Nvidia (NVDA) were responsible for close to half its total return (6.47%). Despite the Russell 3000 Growth Index losing nearly 29% in 2022 and underperforming its value counterpart by 2,100 bps, the benchmark remains extremely concentrated (Apple and Microsoft alone account for 22.4% of the index). Meanwhile, a tighter financing environment created by the Fed’s aggressive rate hike campaign, and worsened by the March failure of Silicon Valley Bank and Signature Bank (OTC:SBNY), hurt small cap companies the most (Exhibit 1) while health care stocks also trailed due to higher funding costs.
Despite limited mega cap exposure, the ClearBridge All Cap Growth Strategy held its own through the shift in market leadership. The combination of underweights to Apple and Microsoft, as well as the reclassification of payment providers PayPal (PYPL) and Visa (V) from IT to financials, caused the Strategy to finish the quarter close to 550 bps underweight IT. While diversification goals limit the Strategy from maintaining market weights in the index’s largest components, our positioning also reflects caution as we anticipate further multiple compression and earnings pressure among IT and shadow tech stocks due to exposure to economically-sensitive end markets.”
4. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Facebook changed its name to Meta Platforms, Inc. (NASDAQ:META) to announce its shift towards being a company focused on metaverse. Meta Platforms, Inc. (NASDAQ:META) opened its flagship Horizon Worlds VR app to teenagers. However, Mark Zuckerberg is currently indicating his plans to go full ballistic on AI after the launch of ChatGPT ushered in an era of AI wars. In a letter to staff in March, Zuckerberg said that metaverse remains “central to defining the future of social connection.” But the overwhelming theme in the letter was AI, cost cutting and Meta Platforms, Inc. (NASDAQ:META)’s focus on efficiency.
Analysts believe Meta Platforms, Inc. (NASDAQ:META)’s VR, AR technologies coupled with its AI offerings could give the company an edge over its competitors in the future.
As of the end of the fourth quarter, 194 funds had stakes in Meta Platforms, Inc. (NASDAQ:META), up from 177 funds in the previous quarter.
Wedgewood Partners made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q1 2023 investor letter:
“Meta Platforms, Inc. (NASDAQ:META)was a top contributor to performance during the quarter. Meta’s 2022 advertising revenue grew slightly (currency-adjusted) over 2021, was up over +60% compared to 2019 (pre-Covid). The shift of advertisers and consumers to social media has been fairly dramatic and sticky. Further, although Meta’s profit margins have fallen below pre-Covid levels, the business likely hired well in excess of what it needed because they assumed the Covid-19 induced growth would continue. The Company more recently guided for 2023 adjusted expense growth to be in the low single digits over 2022, which we think is a sensible level to be at as end markets normalize. We think Meta still has plenty of room to moderate its expense base and drive significant value by repurchasing shares at historically depressed multiples.”
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 209
Alphabet Inc. (NASDAQ:GOOG) is making inroads in the metaverse industry via acquisitions. To boost its AR efforts Alphabet Inc. (NASDAQ:GOOG) last year acquired Raxium, a microLED company that develops tiny light-emitting diodes for augmented and mixed-reality device displays. Last year, it was reported that Alphabet Inc. (NASDAQ:GOOG) was working on its own AR headset under codename Project Iris. Alphabet Inc. (NASDAQ:GOOG) reportedly plans to ship the product by 2024. Alphabet Inc. (NASDAQ:GOOG) also acquired digital avatar company Alter for $100 million.
At the end of the fourth quarter of 2022, 209 hedge funds tracked by Insider Monkey reported owning stakes in Alphabet Inc. (NASDAQ:GOOG). The most notable hedge fund stakeholder of Alphabet Inc. (NASDAQ:GOOG) during this period was Cathie Wood’s ARK Investment Management with a $25 million stake.
Ensemble Capital made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q1 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) (+17.57%): Prior to the bank runs, we had planned for this letter to include an extended discussion of ChatGPT, the new artificial intelligence (AI) features available in Microsoft’s Bing search engine, and the threats and opportunities to Google of AI powered chatbots. We will revisit an in-depth discussion of this topic in a future letter, but we do want to comment on it briefly here.
If you step back and think about what is happening with AI, two things are clear. First, AI is not new. All sorts of services you use today are powered by AI. This is particularly true of Google’s existing services. In fact, Sundar Pichai’s first speech after assuming the role of CEO was about how the age of AI was arriving and why Google was an “A.I.-first” company. But with ChatGPT, OpenAI has absolutely launched an amazing tool in allowing everyday people to use natural language chat to interface with a highly advanced AI system…” (Please click here to read the full text)
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. (NASDAQ:AMZN) has no direct metaverse offerings as of yet but the company has been dabbling in the technology for quite some time now. Amazon.com, Inc. (NASDAQ:AMZN) launched Cloud Quest, a virtual city-based role-playing game which allows people to build practical AWS Cloud skills. In 2020 Amazon.com, Inc. (NASDAQ:AMZN) launched its Room Decorator app, which lets users try and test furniture and home décor items in their space. Last year Amazon.com, Inc. (NASDAQ:AMZN) launched “Amazonmetaworld,” a metaverse of digital gamification experiences, in five Indian cities. The experience included wearing a VR headset and walking around in virtual worlds and interacting with others.
Amazon.com, Inc. (NASDAQ:AMZN)’s most important offerings in the metaverse space are related to software. Amazon.com, Inc. (NASDAQ:AMZN) supports several extended reality companies including Campfire 3D, Meta, Magic Leap, Nvidia, and many others. AWS Spatial Computing services are famous among metaverse developers. Amazon.com, Inc. (NASDAQ:AMZN) also supports OpenXR and has converted its gaming engine Lumberyard into the Open 3D Engine in partnership with the Linux Foundation to create an open-source game engine.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
While Microsoft Corporation (NASDAQ:MSFT) has not yet launched any major projects in the metaverse space, the company has some important offerings in the AR/VR space related to metaverse technologies. In November 2021 the company launched Mesh for Microsoft Teams, which has mixed reality capabilities that allow users to interact with each other via holographic experiences.
“It’s also a gateway to the metaverse – a persistent digital world that is inhabited by digital twins of people, places and things. Think of the metaverse as a new version – or a new vision – of the internet, one where people gather to communicate, collaborate and share with personal virtual presence on any device,” the company said in a blog post while announcing the launch of Mesh.
Microsoft Corporation (NASDAQ:MSFT) is also known for its AR/VR headset called HoloLens.
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Disclosure: None. 11 Best Metaverse Stocks To Invest In is originally published on Insider Monkey.
