Today’s technology is enabling virtual worlds for people to meet, play immersive games, and even conduct business. More commonly, this virtual world concept is called the metaverse. Much of the details of how all this will come about are up in the air, but savvy investors know this is a trend that shouldn’t be ignored. There are a number of ways to play metaverse trends, but betting on solid companies with a history of success that could benefit from metaverse tailwinds is a great way to profit.
There came up 3 favorite stocks Nvidia ( NVDA -3.53% ), Qualcomm ( QCOM 0.50% ), and Autodesk ( ADSK -2.93% ).
Nvidia: Powering the metaverse and so much more
Danny Vena (Nvidia): There’s no denying the potential the metaverse represents. That said, it could take years or even decades for it to reach escape velocity. For that reason, investors looking to capitalize on the metaverse should narrow their focus to industry leaders that have a thriving business, secular tailwinds, and a large addressable market — aside from any opportunity presented by the coming digital realm. One company that passes that test with flying colors is Nvidia.
The pioneer of graphics processing units (GPUs) is the undisputed industry leader, boasting a dominant 83% share of the discrete desktop GPU market. Nvidia’s consistent innovation makes its processors a must-have for any serious gamer. This led to record gaming revenue that surged 61% in fiscal 2022 (ended Jan. 30, 2022).
Parallel processing is the secret sauce that gives GPUs the ability to process a multitude of complex mathematical calculations at lightning-fast speeds — and no company has been able to harness this raw power better than Nvidia. This will no doubt come into play when creating the graphic reality of the metaverse.
Then there’s the data center segment, which supplies processors for artificial intelligence applications, cloud computing, and data centers. Investors might be surprised to learn that Nvidia is also the leading provider of chips used in cloud computing. Its extensive customer list includes such names as Amazon Web Services (AWS), Alphabet‘s Google Cloud, and Microsoft Azure, among many others. Nvidia’s data center segment also produced record-setting revenue that jumped 58% last year.
The success of Nvidia’s two largest business segments helps illustrate the strong trends fueling its growth, but the company has barely scratched the surface of an enormous opportunity. Nvidia generated record revenue of roughly $26.9 billion last year, but that’s a drop in the bucket in terms of its total addressable market, which management estimates will grow to $250 billion by 2023.
This provides investors with a solid foundation of success upon which to bide their time while they wait for the metaverse to slowly materialize. That said, given Nvidia’s expertise in graphics processing, the metaverse will represent a natural extension of its existing business, powering everything from augmented reality (AR) and virtual reality (VR) devices to the data centers that will house these virtual spaces.
Even without the metaverse, Nvidia is deserving of a place in a diversified portfolio. The metaverse will merely provide patient investors with a little something extra.