Thirty years ago, the novel by Neal Stephenson Snow accident introduced the idea of humans escaping from a dystopian nightmare by immersing themselves in a virtual reality world called the “metaverse”.
At the time, it looked like a worldview that belonged to science fiction, with The matrix, the cult film that tackled a similar theme seven years later.
But today, the idea that humans can exist and thrive in an alternate virtual world is starting to come closer to reality.
Tech giant Facebook believes in the concept so much that it plans to spend US $ 10 billion (£ 7.4 billion / RM 42 billion) this year to develop its own metaverse, a virtual world where people can. socialize, work and play. Facebook even changed the name of its holding company to Meta to reflect its aspirations.
The idea of completely immersing oneself in an alternate world was made possible by the development of virtual reality (VR) headsets in the gaming industry, transporting people to exciting places. Augmented reality (AR) equipment will also play a role in the metaverse. AR differs from VR in that it superimposes images on real scenery.
It’s time to create a whole new virtual identity
The metaverse will allow people to adopt a digital identity through an “avatar” to play games, see friends, meet new people, attend virtual business meetings, watch events such as concerts and matches. sport and buy a multitude of items.
Simon Powell, equity strategist at investment bank Jefferies, said: “A single metaverse could be over a decade away, but it has the potential to disrupt almost everything in human life that has yet to be. disturbed.”
With that in mind, fund managers and investment analysts are excited about the potential investment opportunities that come with the creation of this parallel digital world.
They highlight the advancements made in the gaming industry where early versions of the Metaverse already exist. For example, popular games such as Roblox, Fortnite and Grand Theft Auto have created their own virtual worlds and social networks.
What is particularly striking about these games is the opportunity they have created for gamers to spend money – something that has not gone unnoticed by some major consumer brands.
Nike, for example, recently registered seven brands to sell virtual clothing and sneakers, joining Gucci and Puma which also offer digital ranges.
Virtual real estate has also proven popular, with buyers spending millions of dollars on cryptocurrencies and non-fungible tokens (NFTs) – digital receipts that prove you own something in the virtual world.
Last November, a virtual land in the Metaverse operated by Sandbox sold for a record-breaking $ 4.3million (£ 3.2million / RM18million). It was bought by Republic Realm, an investor in virtual real estate.
Which companies will dominate the new world?
Although the development of this virtual world seems exciting, it is still in its early stages. At this point, there is no way to tell which companies will dominate. Facebook has made its intentions clear, but Apple and Google have yet to explain what their vision for a metaverse might look like.
Stephen Yiu is manager of the Blue Whale Growth investment fund. He fears that Meta (Facebook) will end up spending tens of billions of dollars on its Metaverse with no guarantee of success.
On the contrary, he says Apple and Google have a natural advantage over Facebook, as they already own the two dominant operating systems for smartphones – Apple iOS and Android – as well as their respective app stores. These will be essential if they choose to create their own metaverse. For any metaverse to be successful, VR headsets will need to become mainstream, beyond being a niche hobby for gamers. Still, Walter Price, director of Allianz Technology investment trust, isn’t convinced this will happen anytime soon.
He says, “I suspect we’re going to see better, more immersive games and cheaper VR headsets. Some of the population will play and enjoy these games, but for me it’s too far a bridge to say that everyone is going to jump into this next wave of technology and meet for virtual experiences rather than real ones.
He adds, “If anything, the pandemic has taught us to seek real experiences and hang out with people in real life.” Ben Rogoff, director of the Polar Capital Technology investment trust, says that of all the well-known tech companies, Apple has the most potential to bring the metaverse to a wider audience, especially if it launches an augmented reality headset. . He adds: “As it stands, it’s not clear what the catalyst will be, but an accessory product from Apple could just ignite the metaverse market.”
While it’s unclear what a Global Metaverse will look like and which company will operate it, we do know that it needs to be built and nurtured.
Yiu highlights Nvidia as a potential winner in this regard. This company, listed on the Nasdaq market in the United States, produces the GPU – a graphics card – which is commonly used in games and dominates its market. Yiu adds, “If the Metaverse is going to happen, it will need a lot of Nvidia cards. It would clearly be a winner whether the Metaverse is developed by Facebook, Google, or Amazon.
Rogoff also points out the infrastructure needed to support a parallel digital world, especially servers, memory, and semiconductor chips. Potential beneficiaries include Samsung, Micron Technology (which produces memory and storage for computers) as well as chip maker AMD.
Why a tech fund may be the answer
So, is it worth being exposed to the metaverse in your investment portfolio? Some experts think so, notably Nathan Sweeney, deputy investment director in charge of multi-assets at Marlborough Investment Management. He says, “The metaverse has similarities to the early days of the Internet in terms of investment opportunities. The whole concept is still in its infancy, but there will be winners and losers along the way.
While we’re likely to see dedicated metaverse funds emerge in the next few years, Sweeney suggests that a tech fund might make more sense.
For example, the iShares S&P 500 Information Technology Sector investment fund holds Apple, Nvidia, Micron and Microsoft in its portfolio. The annual fee is 0.15% and shares of the fund can be purchased through major investment platform providers such as Hargreaves Lansdown.
Nick Wood, head of fundraising at wealth manager Quilter Cheviot, likes the Polar Capital Technology investment trust.
The Metaverse represents one of eight themes that fund manager Rogoff pursues – an approach Wood describes as sensible because it’s not clear whether the Metaverse will actually take off.
Polar Capital Technology is listed on the London Stock Exchange and its stock identification code is 0422002. The annual fee totals 0.82% and over the past year it has generated a return of 19%. Other technology funds that may at any given time offer exposure to the metaverse include Allianz Technology (code: BNG2M15), Axa Framlington Global Technology (B4W52V5), and L&G Global Technology Index (B0CNH16). – Daily Mail, London / Tribune News Service