Friday, February 3, 2023

3 Top Metaverse Stocks to Buy in January | The Motley Fool

Wall Street expects 2022 to be a banner year for the adoption of the Metaverse, as many companies are expected to come up with hardware and software offerings that will help consumers work, play or learn in virtual three-dimensional worlds.

Crunchbase estimates that $10 billion was invested in virtual reality (VR)-related start-ups last year, while meta platform It reportedly also spent a similar amount on its AR (Augmented Reality) and VR initiatives. Goldman Sachs It is estimated that spending on Metaverse-related technologies could reach $1.35 trillion over time, indicating that there is a long-term opportunity for investors to take advantage.

Intel (NASDAQ:INTC), Himax Technologies (NASDAQ:HIMX), And NVIDIA (NASDAQ:NVDA) There are three tech stocks that could win big from the metaverse. Let’s look at the reasons for this.

Person Wearing Virtual Reality Headset.

Image source: Getty Images.

1. Intel

Intel management reported in December 2021 that the metaverse could be “the next major transition in computing” as more people rely on digital technology to “communicate, collaborate, learn and sustain” their lives. Management said this would create the need for major networking upgrades to support the creation of life-like environments and human-like avatars in virtual worlds in real time.

According to Intel executive Raja Koduri:

Truly persistent and immersive computing for computing at scale and accessible by billions of humans in real time will require even more: a 1,000-fold increase in computational efficiency from today’s state of the art.

Not surprisingly, the metaverse may lead to the need for more hyperscale data centers that can support the massive workloads that this emerging technology trend will create. The Dell’Oro Group estimates that spending on hyperscale data centers could increase by 30% in 2022. The long-term forecast also appears bright as the hyperscale data center market could see an annual growth rate of 22% through 2028, according to a third party. Assessment.

According to Mercury Research, Intel is in a solid position to take advantage of this rapid growth as it had 90.5% of the server processor market share in the second quarter of 2021. Although Chipzilla is facing some heat in this market Advanced Micro Devices, it is positioning itself to defend its dominant share with an aggressive product roadmap that aims to help it gain its technology edge over rivals.

As such, Intel could become a top Metaverse stock in the long run, thanks to its dominant position in the data center processor market, which is expected to see solid growth. Given that Intel is trading at less than 10 times earnings, now may be a good time for investors to buy shares of this chip giant as it looks primed for a turnaround, with the metaverse as an additional catalyst. is set to work.

2. Himax Technologies

Himax Technologies may not be a household name, but this chipmaker was a metaverse player before the concept became popular. In 2013, Google bought a stake in Himax to fund the chipmaker’s display business. The latter was making liquid crystal on silicon (LCoS) chips and modules for Google Glass, a pair of smart glasses that ultimately failed to take off at the time due to privacy concerns.

However, with the concept of the Metaverse finally heating up in the tech world, Himax may find new customers for its LCoS displays that can be deployed in AR headsets and AR-enabled glasses. Himax states that LCoS is going to play an important role in AR headsets, as this technology can make headsets compact and more power-efficient, while reducing manufacturing costs.

The company says that its client list includes some of the top players launching AR/VR headsets. Therefore, investors looking to pull money out of the Metaverse should keep a close eye on Himax, as a significant increase in sales of AR/VR headsets could drive demand for its LCoS chips. According to market research firm IDC, shipments of AR/VR headsets reached 9.7 million at the end of 2021. By 2025, IDC estimates that around 44 million AR/VR headsets are expected to be sold, indicating the market is ready for the clock. Compounded Annual Growth Rate (CAGR) of around 46%.

With Himax stock trading at 6.7 times earnings and 1.6 times selling, savvy investors should keep this potential Metaverse winner on their radar, as it continues to grow rapidly. The chipmaker’s revenue was up 75% year over year to $421 million in the third quarter of 2021, while adjusted earnings per share rose to $0.79 per share from $0.07 in the year-ago period.

Himax can sustain such spectacular growth due to increased demand for its chips in the automotive and smartphone display markets, and Metaverse is likely to become another lucrative market for the chipmaker to tap.

3. Nvidia

Nvidia’s share price is down about 5% in 2022, which has opened up a good opportunity for investors to join in on this potential Metaverse winner as it is now trading at 86x earnings. While that multiple isn’t cheap by any means, Nvidia is now trading at a 90 percent discount to its 2021 earnings. If the stock continues to slide in the near term, a potential interest rate hike leads to a selloff in the technique. The stock, investors should consider going long with Nvidia, because it can win out over the Metaverse in a number of ways.

For example, demand for Nvidia’s data center GPUs (graphics processing units) may increase to support the creation of the metaverse. In a November 2021 interview with market research firm Dell’Oro, Nvidia CEO Jensen Huang explained that data centers would have to evolve to meet the needs of the Metaverse. The creation and delivery of virtual 3D worlds on a large scale to consumers around the world means that data center servers have to be accelerated with multiple GPUs.

It is worth noting that the global data center GPU market is already expected to grow at a 42% annual growth rate and reach $20 billion in revenue by 2027. The Metaverse could accelerate that already impressive growth rate.

Another way that Nvidia is looking to tap into the Metaverse is through its Omniverse enterprise platform that allows creators to create “anatomically accurate 3D worlds and digital twins.” As the chipmaker explained on its November 2021 earnings conference call:

The initial market reception for Omniverse has been incredible. Professionals from over 700 companies are evaluating the platform, including BMW, Ericsson, Lockheed Martin And Sony pictures. Over 70,000 individual creators have downloaded Omniverse since its open beta launch in December. There are approximately 40 million 3D designers in the global market.

Nvidia has now made the Omniverse platform generally available to individuals so that artists, designers and makers can collaborate with each other to create virtual worlds. Therefore, Nvidia will not only provide the means to power the Metaverse through its chips, but will also enable consumers to have an experience with their devices that will help creators create 3D worlds.

Therefore, the metaverse could become another massive growth driver for Nvidia in the long run, in addition to the company’s other catalysts. Overall, Nvidia is a top growth stock to buy to take advantage of this emerging tech trend that could help it grow its earnings at a faster pace than Wall Street’s projected 40% CAGR for the next five years. .

This article represents the opinion of the author, who may disagree with the Motley Fool Premium Advisory Service’s “official” recommendation status. We are motivated! Questioning an investment thesis – even our own – helps us all to think critically about investments and make decisions that help us become smart, happy, and wealthy.

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