The Metaverse aims to be a groundbreaking concept that will change the way people interact with each other by connecting our virtual avatars in 3D virtual worlds from the comfort of their home, office or anywhere with devices such as headsets or smartphones.
Third-party estimates suggest the Metaverse could become an $800 billion market by 2028. It is expected that people will use this platform for work, education, socializing and even attending sporting events and concerts. Unsurprisingly, many tech giants are scrambling to make the most of this potential revenue opportunity.
NVIDIA (NVDA 4.28%) and Apple (AAPL 2.14%) are among the technology companies that could benefit from the metaverse. Both stocks have soared over the past month, and it won’t come as a surprise that they will continue to climb going forward thanks to the Metaverse. Let’s see why.
1. NVIDIA
Nvidia graphics cards and data center chips will play an important role in making the metaverse a reality. This is already evident when using Nvidia’s graphics cards in meta platforms(META 1.70%) AI Research SuperCluster (RSC) Supercomputer designed to help build a foundational framework for handling Metaverse workloads.
Meta had announced in January this year that it would use 16,000 Nvidia GPUs (graphics processing units) to power this supercomputer. Additionally, Meta recently announced that it will increase GPU deployments in data centers fivefold this year to power its content discovery engine with artificial intelligence (AI), which could be a boon to Nvidia’s graphics card sales.
Nvidia’s relationship with Meta could grow stronger over time, as the latter intends to spend aggressively over the long term to make the Metaverse a reality. That’s because the metaverse would require a massive increase in processing power. chip giant intel estimates that successfully launching the metaverse would require a thousand-fold increase in computing power.
This is where Nvidia’s GPUs come in, thanks to their ability to handle heavy workloads. Put more simply, the Metaverse will create the need for more data center accelerators like GPUs. According to third-party estimates, the data center accelerator market could grow at a 37% annual pace through 2026. Catalysts like Metaverse could help this market maintain its impressive pace of growth, and present Nvidia with a solid opportunity to expand its data center business over the long term.
Nvidia’s data center revenue for the first quarter of fiscal 2023 (for the three months ended May 1, 2022) grew 83% year over year to a record $3.75 billion. The segment’s impressive growth drove its total revenue up 46% to $8.29 billion. The bright prospects for its data center business are one of the reasons analysts expect Nvidia to grow 23% annually over the next five years.
However, the introduction of new technologies like Metaverse could give Nvidia’s data center segment an extra boost and help it grow faster.
2. Apple
Apple is a consumer electronics giant famous for its iPhones and iPads, and the Metaverse could represent the next frontier for the company to grow its device business.
Apple is reportedly developing a mixed reality headset that would support both augmented reality (AR) and virtual reality (VR) devices. The tech giant is expected to launch its first headset next year, followed by the release of an improved version in 2024.
This alleged move by Apple could open up a whole new addressable market for Apple, as AR/VR headsets will be the gateway to the metaverse for users, transporting them to virtual worlds where their virtual avatars could interact with others.
Not surprisingly, market research firm IDC estimates that VR headset sales could grow from an estimated 13.9 million units in 2022 to almost 35 million units in 2026. Meanwhile, AR wearables market revenue is expected to reach $30 billion by 2030, according to data analytics firm GlobalData.
Apple’s patent wins for its mixed-reality headsets suggest the company may actually be gearing up to enter this market. So don’t be surprised to see that the Metaverse gives Apple’s growth a nice boost going forward by making a significant contribution to revenue. Add in other catalysts, such as Apple’s dominance in the 5G smartphone market and the growth of its services business, and investors have multiple reasons to buy this stock.
Apple stock is up 17% over the past month, but it’s still available at an attractive valuation. Its price-to-earnings multiple of 27 is down from its year-earlier multiple of nearly 32. Investors looking to buy a tech stock should take a closer look at Apple, as the company seems poised to continue its bull run long to come as catalysts do as the metaverse comes into play.
Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Intel, Meta Platforms, Inc., and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long March 2023 $120 calls on Apple, short January 2023 $57.50 puts on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.