Once upon a time, companies would have set out to change the world. But now, some of the biggest tech giants are working together to achieve a new goal: building an entirely new one. Officially known as the metaverse, the virtual world will change the way we live, work, and socialize.
Three Motley Fool contributors believe ID pads (NASDAQ: FB)And Matterport (NASDAQ: MTTR), And nvidia (NASDAQ: NVDA) They are the biggest game changers in the field, and they can increase your stock portfolio in the long run.
Connecting the world in a whole new way
Anthony Di Pizzo (Introduction Platforms): Meta Platforms, formerly Facebook, has made a rebranding to reflect its shifting focus toward the metaverse. But its leading social network is still the largest in the world with more than 2.9 billion monthly active users. Its secondary brands, Instagram and WhatsApp, have also been a huge success in their own right.
The company will adapt its experience of connecting people through on-screen social networks to this entirely new virtual world where instead of profiles, its users will have their own photos. CEO Mark Zuckerberg envisions these avatars having their own inventories of digital goods and the ability to instantly teleport to different virtual experiences that many of us wish we had in real life. But the financial opportunity can arise from having its own self-contained digital economy where users pay for goods, services and even activities. It is conceivable that if Meta Platforms own the architecture of the virtual world, they can reap revenue from every transaction that takes place within it. Think how An apple Earn money with the App Store: It owns the ecosystem and therefore has great pricing power compared to those operating in it.
Zuckerberg acknowledges that building the metaverse will require a collaborative effort from many tech companies, including semiconductor producers who make the advanced chips that will bring it to life. But if the Meta Platforms are as dominant in the metaverse as they are in social networks, they could be much higher than the other players involved.
The company is on track to increase its annual revenue by 3.083% over the past decade to reach $117 billion this year. However, this could be diminished in the future if the metaverse is launched.
Jimmy Loko (Matterport): The company focuses on providing physical spaces to the cloud by creating 3D digital images of spaces. There are many things companies can do with “digital twins” of their buildings or spaces, such as putting them online to allow potential customers to take a 3D tour of the space. Matterport has seen massive adoption by many big name companies across various sectors, such as Redfin in real estate and Swinerton in construction, but this could expand to any company that wants to move its business into the metaverse.
These broad and extended use cases have led to impressive adoption. The company reported third-quarter 2021 revenue of $27.7 million, which grew 10% year over year. This was driven by 36% growth in subscriptions to $15.7 million and space under management reaching $6.2 million, an increase of 62% compared to the same quarter last year. The total number of subscribers has doubled to 439,000 on the Matterport platform.
What is not hot is the profitability of Matterport. The company considers net income and free cash flow negative by a wide margin. The company’s free cash flow so far this year has been negative $28 million, and the company incurred a net loss of $168 million in the third quarter, representing 600% of revenue. In the third quarter of 2020, the company was close to break-even, but a 317% increase in operating expenses and worsening gross margin caused the company’s profitability to swing in the wrong direction.
If Matterport can become an integral part of building the metaverse over the next decade, its concerns about the path to profitability may disappear. Fortunately for Matterport, its services are exactly what is needed to build the metaverse. The company can introduce physical spaces into the digital world, allowing users to create aspects of their real lives in the cloud.
Additionally, businesses that locate themselves in the cloud can enable customers to shop online in a more comprehensive 3D environment. This is the main objective of the metaverse, and Matterport has a clear ability to make this vision a reality.
Computational platform to run the metaverse
Trevor Jenwin (Nvidia): Nvidia specializes in accelerated computing. At the heart of its portfolio is the GPU, a high-throughput chip that can perform thousands of calculations simultaneously. As their name suggests, GPUs are especially good at delivering ultra-realistic graphics in video games and movies. But these chips have also seen adoption in data centers where they are accelerating computing-intensive workloads such as artificial intelligence (AI).
To complement its hardware, Nvidia also offers a suite of GPU-optimized software frameworks and applications: Merlin for recommendation engines, Metropolis for computer vision, Riva for speech recognition, and NeMo for natural language processing. Collectively, these tools are accelerating the development of AI-powered applications, and form the basis for something much bigger.
Earlier this year, Nvidia announced Omniverse Enterprise, a platform that combines its expertise in graphics, artificial intelligence, and supercomputing. Omniverse enables 3D creators (architects, engineers, and developers) to collaborate in real time, via a suite of 3D design software. It also acts as a physically accurate simulation engine, which means that it can generate synthetic data sets. In turn, these data sets can be used to train AI models for robotic applications and autonomous vehicles.
Recently, Nvidia announced Omniverse Avatar, a platform for building interactive avatars for artificial intelligence — digital machines that can see, speak, think and understand. In the near term, this technology could revolutionize customer service; CEO Jensen Huang believes that smart avatars will provide assistance across 25 million physical locations (such as retailers, restaurants and airports) and in 100 million vehicles on the road. But in the long run, the repercussions will be greater.
Specifically, intelligent avatars created in the Omniverse will likely be a building block in the metaverse because the presence of interactive digital characters will make the experience more immersive, creating more ways in which users can participate in a shared virtual world. In fact, the Omniverse platform itself will likely play a major role in shaping the metaverse as it allows 3D design teams across disciplines and geographies to collaborate in real time. That’s why Nvidia seems like a great way to play this emerging technology.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.