According to Reid Menge, Co-Portfolio Manager of the BlackRock Technology Possibilities Fund, the metaverse may seem futuristic, but the investment opportunities are here and now. He talks about how to get into the next big digital frontier and how to invest in it.
To begin 2022, technology equities have taken a beating. Investor fears about how increasing interest rates would affect these firms’ long-term cash flows are the main issue. While rate jitters may continue to fuel volatility in technology stocks, we remain optimistic about the sector’s long-term worth. The metaverse is one area that has gotten a lot of interest.
As demonstrated in the graph below, the phrase is increasingly appearing in headlines, around dinner tables, and in business transcripts.
A massive foray into the metaverse
A revolution is brewing
For good cause, interest is piqued. The metaverse is a virtual universe that combines features of gaming, virtual reality (VR), and augmented reality (AR). At this point, it’s similar to the internet in the early 1990s or the smartphone in the early 2000s in that we anticipate it to be large and impact people’s lives. However, we do not yet know how or how large the change will be.
What we do know is that both work and pleasure will be disrupted. Virtual meetings will take on new life, but users may also be taken to the golf course as their favorite player tees off, or onto the stage while a rock band performs live in front of millions of people around the globe.
Taking advantage of the situation
Why is widespread acceptance of virtual worlds now becoming a reality? Virtual worlds have existed for decades, but why is it finally becoming a reality? There are three main causes for this:
It’s achievable because to next-generation electronics and higher computational power.
The COVID-19 crisis hastened the transition to a digital lifestyle. People prefer to work, shop, and socialize from the convenience of their own homes.
Cryptocurrencies may make it possible for transactions to take place in the metaverse in a smooth and global manner.
Those who already spend time in virtual worlds are doing it with outdated technology that is limited by the screen. This will be taken to the next level by VR headsets and AR glasses, as well as strong 5G mobile networks.
As early as 2023, we might witness a breakthrough in AR glasses – a version that is light and smart enough to be worn every day. Virtual reality headsets will also evolve, although they are less likely to be a “game changer” due to their inability to be worn while moving.
Investing ideas that are right on time
Although the metaverse may not become widespread until later this decade, there are already financial possibilities.
Companies on the internet are getting ready. They aim to supply both the platform and the hardware, avoiding the mistakes made years ago when smartphone makers were given complete control over the hardware and operating system. The main hardware businesses are also vying for first-mover advantage in providing next-generation technologies.
What are the best places to explore for potential metaverse investing gains? The firms that can deliver the elements needed to make glasses and headsets to the large internet, software, and smartphone companies are the ones we view as having the greatest immediate potential. Wearable, stylish, and metaverse-functional AR glasses will need a new generation of electronics, batteries, and lenses.
Once the hardware is in place, we can focus on the services that the new devices can access and the software that will form the metaverse. We also favor firms that are well positioned to help “create” the metaverse by designing and developing virtual environments.
Insight into the larger picture
Given recent market volatility, many investors may be distracted from the long-term potential of the creative technology businesses that are building and powering the future. However, we see technology as the foundation of today’s economy. Secular growth trends, such as industry digitization and an ever-increasing dependence on data analytics, were accelerated during the pandemic and are multi-year transitions that we anticipate to continue – independent of the speed of reopening or interest rate movements. The metaverse is only one example of the immense possibility that exists in the technological world, producing long-term returns for investors.