Metaverse is a hot tech trend that is currently in the early stages of growth, but is expected to be big in the long run thanks to the ability to connect with people spread around the world in virtual worlds. 3D.
In simpler terms, people can work, play, learn, and interact within the metaverse from the comfort of their homes using mixed reality devices that support both augmented reality and virtual reality. Not surprisingly, investments in this space are expected to grow rapidly in the coming years. The third-party estimate predicts that the metaverse market could grow at an annual rate of nearly 48% by 2029, reaching a size of just over $ 1.5 trillion by the end of the forecast period.
Nvidia (NVDA 4.10%) at Microsoft (MSFT 1.07%) are two companies that can help investors take advantage of this trend. Let’s see why the metaverse might send stocks of these tech giants on a bull run.
Nvidia stands to gain from the metaverse in many ways. In fact, the graphic design specialist is already reaping the rewards of this emerging tech trend by Metaplatforms‘ (FB 0.92%) supercomputers should help support the evolution of the metaverse. Meta’s artificial intelligence (AI) Research SuperCluster (RSC) supercomputer is powered by over 6,000 Nvidia graphics processing units (GPUs). The supercomputer will eventually be powered by 16,000 Nvidia GPUs once Meta completes its expansion.
Meta believes that “the work done at RSC will pave the way for the creation of technologies for the next major computing platform – the metaverse, in which AI -based applications and products will play a key role”. This means that demand for Nvidia GPUs should ideally explode in the long run, as data centers, servers and supercomputers need to be upgraded to meet real-time delivery of 3D content to millions. tao. users around the world.
However, this is not the only opportunity for Nvidia in the Metaverse. The company believes that along with the chips, the metaverse will also create strong demand for enterprise software. According to Nvidia, the hardware and software opportunities together represent a $ 300 billion addressable market.
Now, we see how Nvidia is likely to win on the hardware side of the metaverse. The good part is that its software opportunities are also coming out. Known as the Omniverse, Nvidia already has a scalable development platform that allows creators and developers to create virtual worlds, specifically digital twins-virtual replicas of physical objects and space. in the real world.
In addition, Nvidia claims that more than 400 companies have reviewed the adoption of its Omniverse platform. giant vehicle BMW used the Omniverse to create a digital twin of a factory, while Ericsson the platform is used to simulate and visualize 5G wireless networks before launching them.
All of this suggests that Nvidia’s business can get good help from Metaverse, and it can play a big role in accelerating the company’s great growth speed. Nvidia ended fiscal 2022 (which ended Jan. 30) with a 61% year-on-year revenue increase to $ 26.9 billion, and the Metaverse Opportunity indicates that it sees tremendous opportunity.
Analysts expect Nvidia to see 30% annual revenue growth over the next five years, and adding opportunities like the metaverse could help it grow at a faster rate and drive long -term action.
Microsoft is another tech giant that will soon win from the metaverse in many ways, including lucrative video game space.
Earlier this year, Microsoft announced it would take over ActivisionBlizzard in a deal worth $ 68.7 billion. When the acquisition was announced, Microsoft’s press release said that “the acquisition will accelerate the growth of Microsoft’s mobile, PC, console and cloud gaming business, and provide the building blocks for the metaverse”. It is noteworthy that Microsoft already has a solid foundation in the games business thanks to its Xbox consoles, Game Pass video game subscription service, and a large library of game titles, thanks to ownership its in some game studios.
This puts Microsoft in a strong position to tap into the metaverse gaming opportunity, which is expected to grow at a very fast pace. Cryptocurrency asset management company Grayscale estimates that virtual gaming worlds could generate $ 400 billion in revenue in 2025, up from $ 180 billion in 2020. Almost all of virtual gaming revenue will generate spending on games, so Activision’s user base of 400 million will give Microsoft access to a wide range of players where it can generate additional spending to stimulate the growth of its gaming business in the metaverse.
Beyond games, Microsoft has sunk into the metaverse with Mesh for Microsoft Teams. This product, based on the popular Microsoft Teams collaboration tool, will allow people located in different locations to attend meetings in immersive 3D spaces through their virtual avatars. . Microsoft Teams has a user base of over 250 million, so the company can sell its metaverse collaboration tool to a wide audience.
Meanwhile, Microsoft also plans to use the metaverse application in the industry sector, where it plans to take advantage of the growing demand for digital twins. This could be a smart move by Microsoft, as the digital twin market is expected to generate $ 61 billion in revenue in 2027, up from $ 10 billion last year, according to Mordor Intelligence.
Add to that the company’s prospects in other profitable markets such as cloud computing and video games, and it’s no surprise that Microsoft is seeing impressive long-term growth. The company’s revenue rose 18% year-over-year in the third quarter of fiscal 2022 (ended March 31) to $ 49.4 billion, while adjusted profit rose. increased by 14%.
Analysts expect Microsoft’s revenues to grow at an annual rate of 16% over the next five years, but don’t be surprised to see it do better than that, thanks to profitable growth engines like the metaverse. That’s why buying Microsoft stock seems like a no-brainer right now, as it’s trading at 26 times earnings, a discount from its five-year average multiple of 37.