Metaverse stocks have taken a hammering since the year began. Some of the biggest names in the sector are down by as much as 50%!
So, why are investors seemingly losing faith in metaverse stocks? And is now a good time to invest in the digital universe? Let’s take a look.
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Metaverse stocks: what are they?
The metaverse is a digital space that enables millions of people to interact with others online. Metaverse stocks refer to companies that are involved in the sector in one way or another.
Mark Zuckerburg is a big fan of the metaverse, famously describing it as the “successor to the mobile internet”.
It can be easy to think of virtual reality (VR) headsets or glasses when thinking of examples of the metaverse. However, video games, or applications, that aren’t accessible through VR headsets can still be classified as part of the metaverse. That’s as long as they utilise software that enables users to interact with others online.
It’s worth knowing that the metaverse can also incorporate ‘augmented reality’ (AR) games or applications, such as those combining both real and virtual elements. An example of such an application is Google Lens.
If you haven’t used this app before, then understand that Google Lens has the ability to translate foreign voice (and text) in real-time. It can also provide live information on anything you point your camera at. For those using AR software for the first time, features like this can easily impress.
How have metaverse stocks performed this year?
So far, 2022 has been a rough time for metaverse stocks. The Roundhill Ball Metaverse ETF – which gives investors exposure to a number of stocks in the digital universe – is down 21.77% since the year began.
In terms of individual stocks, Meta, the owner of Facebook – and probably the best-known constituent of the metaverse – is down a whopping 36% since the beginning of January.
On a similar note, Unity Software, developer of video game platforms, is down 30%. Meanwhile, NVIDIA Corporation, designer of graphics and processing units, is down 12%.
A company that has suffered very badly in 2022 is Roblox Corporation. The video game developer has lost almost half (49.7%) of its value since the year began.
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Why have investors lost faith in the sector?
As well as being a fascinating concept, many believe the metaverse has huge potential for growth. That’s partly because of a widespread belief that the digital universe has the ability to transform business meetings in future. So far, it’s fair to say that the metaverse is typically associated with social elements as opposed to its potential for businesses.
Despite this, however, investors have clearly been losing faith in the metaverse this year. One big reason for this is likely because of profitability concerns.
In February, it was revealed that Meta’s ‘Realty Lab’ project, which develops virtual reality hardware and software, has lost $21.3 billion (£16.18 billion) over the past three years. Meta shares tumbled 22% on the day of the announcement and have fallen further since then. Meta’s share price currently stands at $216.49. That’s a long way off its highest ever value of $378.69 seen in September 2021.
Meta isn’t the only metaverse stock of course. However, due to the sheer size of the company, its share price can influence the value of other players in the digital universe.
Is now a good time to buy metaverse stocks?
If you believe in the metaverse and you think that the sector is likely to be more profitable in future, then you may be inclined to buy individual stocks involved in the digital universe.
Yet, if you do this, then it’s worth bearing in mind that the metaverse is a very new concept. And as we have seen this year alone, the sector is also highly volatile. As a result, it’s probably not the best investment if you have a risk-averse investing style.
Also, if you’re looking to buy metaverse stocks because of recent falls this year, then do bear in the mind the pitfalls of buying the dip. Remember, just because specific stocks have fallen recently, there’s no guarantee prices will recover. And even if they do, it could take many years.
As with any type of investing, your capital is at risk and your portfolio can both rise and fall in value. If you’re new to investing, then it’s worth taking a look at our investing basics guide to learn the ropes.
Are you looking to invest? If you want to start investing, then you can buy individual stocks through a share dealing account. If you’re looking to invest specifically in the digital universe, then explore The Motley Fool’s top metaverse stocks of 2022.
