There’s a lot going on in the technology sector right now. With everything from cryptocurrencies and NFTs (non-fungible tokens), to Web 3.0 and the prospect of a decentralised internet, it feels like we’re on the cusp of the next technological revolution.
Then there’s AR/VR (augmented reality/virtual reality) which is becoming increasingly popular. So popular, in fact, that Facebook has just rebranded itself as Meta (NASDAQ: FB). The company is now going to focus considerable resources on developing a new digital world it’s calling ‘the metaverse’.
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It isn’t just Meta that’s innovating in this space. Nvidia (NASDAQ: NVDA) is an advanced graphics card designer that’s developing new technology here, too. But Nvidia calls its digital world ‘Omniverse’.
I think these companies will lead the way in the growing AR/VR space. Let’s take a closer look.
Omniverse
It was just last week I wrote about Nvidia and how it was hosting the Graphics Technology Conference (GTC). A range of new products were announced. But it was the expansion of Omniverse I was most excited about.
But what exactly is Omniverse?
Omniverse is a platform for companies and individuals to create virtual worlds, but more than just in the gaming and entertainment sector. Companies are using Omniverse in a wide array of applications according to the CEO, Jensen Huang. Lockheed Martin, BMW, and Ericsson are a few examples that are using Omniverse for things such as wildfire prevention research, 5G network simulations, and 3D factory reconstructions.
One of the announcements at GTC was Omniverse Replicator, which is an engine to build better digital worlds. Working within Replicator, Nvidia Drive Sim is a simulator for autonomous vehicles to deploy testing in a wide range of scenarios.
I think there’s a lot more to come from Nvidia and Omniverse.
Meta(verse)
Thanks to Facebook’s rebrand to Meta and its Oculus VR headsets, the metaverse is likely the better-known platform. Meta plans to develop this into the next evolution of social connection.
The metaverse will be a platform to create virtual worlds to let users socialise, collaborate, and play in ways that we can’t do today. There are plans for the metaverse to span gaming and education, and even hosting of concerts and sporting events, all in a virtual world.
Meta will now report on its metaverse division separately, but investors should expect billions of dollars to be invested over the coming years. Operating profit will be reduced by $10bn 2021 alone. Expectations are high, but it will be a very long-term project.
Risks ahead
As a user of VR, I’m excited about the prospect of the metaverse. I also think Omniverse has the potential to revolutionise how businesses plan and develop new technologies.
But both platforms will take considerable investment in the years ahead, without guarantee of success. For Nvidia in particular, the shares are valued on a price-to-earnings ratio for this year of 75. This is a hefty multiple that is pricing in a lot of success.
Then, Meta has a whole host of reputational issues it has to deal with, almost on a daily basis. Its traditional family of social media apps, being the source of these problems, may weigh on the company for some time to come.
Despite these risks, I will continue holding both stocks in my portfolio.
