The Next 10X Stocks Battlefield— Metaverse
10+ stocks to look into for the end of the year
The term Metaverse became popular after Facebook CEO Mark Zuckerberg stated that social network is becoming a Metaverse in the earning call.
“I expect people will transition from seeing us primarily as a social-media company to seeing us as a Metaverse company,”
— Zuckerberg
The definition of Metaverse made by Zuckerberg are:
- “a virtual environment where you can be present with people in digital spaces,”
- “an embodied Internet that you’re inside of rather than just looking at. We believe that this is going to be the successor to the mobile Internet.”
It’s inspired by Neal Stephenson’s novel “Snow Crash” by 1992
In short, Metaverse is a virtual world and offers us another life.
The term “Metaverse” comes from Neal Stephenson’s 1992 novel “Snow Crash,”. It is “a computer-generated universe that his computer is drawing onto his goggles and pumping into his earphones.”
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Metaverse is the next generation of social network
In this article, instead of Metaverse 101, I would like to share the next generation of social networks. It will be driven by technologies related to Metaverse, i.e. VR, AR, Blockchain.
VR, AR and Blockchain are not new technologies, while they are not matured enough at this stage. It implies that they are at a growing stage. Those 10x stocks were at growing stage, i.e. Tesla, Tencent, and Nvidia a few years ago.
A new investment theme
Other than EV, semiconductors, and net zero, Metaverse would be another high growth investment theme. Secular trends may open up opportunities for investors as some assets or companies may be revalued.
The Metaverse represents the accelerating trends including online games, social network, user-generated content (UGC), VR and AR. It creates growth opportunities for first mover building large virtual worlds, and beats those to reduced engagement and smaller game makers.
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Opportunities
“Digital goods and creators are just going to be huge,”
— Zuckerberg
Online gaming companies such as Roblox, Tencent, Netease, Microsoft, Activision Blizzard, Electronic Arts, Take-Two are potential candidates creating the 3D Metaverse.
The global Metaverse revenue opportunity could approach $800 billion in 2024 vs. about $500 billion in 2020, based on our analysis and Newzoo, IDC, PWC, Statista and Two Circles data. The primary market for online game makers and gaming hardware may exceed $400 billion in 2024 while opportunities in live entertainment and social media make up the remainder. — Bloomberg
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Metaverse Competitive Landscape
Ref. to article titled How Beeple Crashed the Art World, by New Yorker editor Kyle Chayka.
No single company is meant to own or run the metaverse, however; it requires coöperation to create consistency. Assets that one acquires in the metaverse will hypothetically be portable, moving even between platforms owned by different corporations. This synchronization might be enabled by blockchain technology like cryptocurrencies and non-fungible tokens, which are defined by their immutable record keeping. — Kyle Chayka, New Yorker
The competition within Metaverse can be broken down into 5 folds as following:
- Online Game Maker
- Game Engine and 3D software
- Social Networking
- Hardware: AR, VR, Console
- Semiconductor
Online game maker
Key players
- Roblox
- Epic Games
- Microsoft
- Activision Blizzard
- Electronic Arts
- Take-Two
- Tencent
- Netease
- Nexon
Game engine sales could be benefited from the adoption of 3D software as more companies are making games for Metaverse.
The growth of a game maker depends not only on the sales of the game but also on the long-term strategy of the company. Game makers with a higher level of positioning, i.e. building ecosystems, could beat the one relying on game sales. Tencent is not only a game maker but also a social network, payment and online music company. However, it’s exposed to Chinese government regulation risk. Roblox on the other hand, is similar to Tencent, while not exposing it to regulatory risk.
Game Engine and 3D Software
Key players
- Unity
- Epic Games
- Roblox
- Unreal Engine
- Adobe
- Autodesk
- Ansys
According to research from Morgan Stanley, there are 60% of mobile games are developed by Unity. It implies that most game developers have already learned how to use the engine. It could drive a virtuous cycle of adoption and development. The strong game developer network and continuous improvement of the engine create a very high entry barrier to new entrants.
However, the competition among the game engine is not just the network, but also emerging new technology, i.e. the control and interaction with the VR device. Also, the simplicity in the use of the game engine, the less competitive edge for Unity, Roblox is a good example.
Social Networking and eSport
Key players
- Tencent
Metaverse will be the new battlefield of social networks. Not only Facebook and Tencent, but related messaging app, i.e. Twitter, Slack, Whatsapp etc. Some of the FinTech concepts, i.e. payment and credit, are linked with instant messaging apps at this moment. They will suffer as well.
Metaverse could act as a new entry point for social networking, gaming , eSport, watching video streaming, listening to music, reading news articles, online shopping and payment.
Hardware
Key players
- Razer
- Lenovo
- HP
- Logitech
- Acer
- Valve
VR headset is a key Metaverse enabler. Facebook acquired Oculus, a VR headset manufacturer in 2014. Horizon is a new community developed by Facebook and is at beta testing stage now.
There are a lot of VR headset manufacturers, including Sony, Razer, Valve, and Logitech. Some of them are connected with their own ecosystem, i.e. Facebook with Horizon as mentioned, and Sony’s VR headset is used for Playstation console only.
VR devices attached with the ecosystem are able to maximize the functionality of the hardware, and better user experience.
Semiconductor
Key players
- Nvidia is the only key player in semiconductors
Most of the games will be downloaded and run on tablets, phones or VR glasses in the future. Performance and low energy consumption are the key specs of the core of those devices. Nvidia’s ARM architecture chips and potential acquisition of ARM is well-positioned.
Arm is at the heart of billions of devices, i.e. from mobile phones and autonomous vehicles to edge systems and the world’s fastest supercomputer, Fugaku, in Japan.
There is a lack of competition in the semiconductor space compared to the VR headset and game engine mentioned above, because the entry barrier of semiconductors is extremely high. For Nvidia, the moat of the company is not only the design of chips but also the CUDA software development interface. After a decade of development, developers are already very familiar with how to code via different coding languages.
Nvidia brings GPU and DPU acceleration to the Arm ecosystem of HPC, cloud, edge and PC platforms with support built into NVIDIA AI, HPC and graphics SDKs.
Further Readings
About me
More Interesting Readings
Are We in the Metaverse Yet?, by John Herrman and Kellen Browning, New York Times
The Metaverse: What It Is, Where to Find it, Who Will Build It, and Fortnite, by Matthew Ball
What is the metaverse? 2 media and information experts explain, by Misha Ketchell
Disclaimer
This article is NOT an investment advice
