I thought I had a decent asset allocation: a two-thirds weighting in overpriced stocks; most of the rest in fixed income, currently fixed to pay almost no income; and dutiful overseas exposure to both geriatric democracies and peppy police states.
But it turns out I’m dangerously overloaded in reality. All of my investments relate to our physical existence as humans on Planet Earth, which, I don’t know if you’ve been following the headlines, but let’s just say I have a Hold rating on it.
Deep thinkers, meanwhile, are suddenly abuzz about a greenfield investment opportunity in an alternate world called the metaverse.
In a recent report, investment bank Jefferies defines the metaverse as “the convergence of physical and digital in a way that is persistent, real-time rendered, and infinite in its ability to offer shared experiences allowing for a total sense of presence to the point where it embodies us.” I’m not sure what that means, but I’m tempted to go long like a Robinhood trader after three hard seltzers of due diligence.
I just have to find the metaverse first. A word of caution: Don’t call it a videogame, or you’ll risk ridicule from the sort of tech-forward friends who have strong opinions on whether
included the right ports in its new MacBook Pro. In fact, to be safe, don’t even call videogames videogames.
(ticker: RBLX), which features pixelated characters on screens and can be accessed through gaming machines, calls itself a “human co-experience platform.”
But it’s OK to acknowledge gaming as a building block of the metaverse, which means major metaverse investors include Roblox, Minecraft owner
(MSFT), and privately held Fortnite creator Epic Games. Add in traditional game makers with metaverse-friendly titles:
(ATVI) and its Call of Duty franchise; Electronic Arts (EA) with Battlefield; and
Take-Two Interactive Software
(TTWO) with Grand Theft Auto.
What all of these multiplayer games have in common is that they’re rapidly becoming rich social networks with some friendly homicide and looting on the side. That has
(FB) founder Mark Zuckerberg so eager for a move to the metaverse that he’s reportedly considering a name change to reflect his new focus. Faceblox? Markaverse? MetaHate Monetization? Probably not that last one.
One way to enter the metaverse appears to be to strap a toddler’s toilet seat to your forehead. Zuckerberg demonstrated this technique on CBS This Morning in August, when he wore something called an Oculus Quest 2 headset to access Facebook’s new virtual-reality platform for office mates, called Horizon Workrooms. There, up to 16 colleagues can gather as better-looking avatar versions of themselves, complete with body language and hand motions to convey unspoken things, like, say, group exasperation over nearly all of Kevin’s ideas. That could provide Kevin with important performance clues to avoid being one day fired by a cartoon.
Oculus is just one maker of unwieldy metaverse headgear.
(2498.Taiwan) have preposterous-looking units, too. These could eventually be replaced by glasses that will allow graphics to be overlaid on the real world, called augmented rather than virtual reality. Remember Google Glass? It’s now called Glass Enterprise Edition 2, and
(GOOGL) is beta testing its Google Meet videoconferencing software on the devices. Facebook recently joined with Ray-Ban to offer its own smart glasses, called Ray-Ban Stories.
Zuckerberg, who is sparring with Apple (AAPL) over new iPhone privacy features that can cut into the profitability of social-media advertising, donned a pair of the shades for a video, calling them “an important step toward a future when phones are no longer a central part of our lives.” It was like watching an android discover sass.
Opportunities for metaverse investment abound. Most range from outrageously valued to financially nihilistic, but there are some values, too. The metaverse will need real-time rendering, or image-drawing, which favors chips from
(NVDA), which trades at more than 20 times sales, and programs from the likes of
(U), closer to 40 times sales. Tiny
(IMMR) specializes in haptic feedback that can give the illusion of feeling virtual worlds, and goes for six times sales.
(QCOM), at four times sales, makes chips for mobile devices, including smart glasses.
There is a metaverse exchange-traded fund that holds these names and more, called
Roundhill Ball Metaverse
(META). It costs 0.75% of assets. Roundhill Investments is an asset manager. Matthew Ball is a venture capitalist who calls the metaverse the next phase of the internet, and has created an index of companies with enabling technologies. Among his predictions are that the metaverse will be “a fully functioning economy” and an experience “that spans both digital and physical worlds.”
Jefferies argues that cryptocurrency and nonfungible tokens, or NFTs, which can prove ownership of digital images, will come in handy in the metaverse. Morgan Stanley says metaverse functions will extend beyond gaming and social networking to include shopping, concerts, education, virtual travel—even dating.
About that last one: I can’t help but notice that a baby boom that was predicted in the early days of pandemic lockdown never occurred. Online gaming exploded in popularity. Attention turned to the metaverse. And the U.S. birthrate plunged 4%, to the lowest level ever recorded.
When I was young, kids learned about the birds and bees the way nature intended: with a hidden nine-volt radio and mono earphone tuned each 10 p.m. to a cheerfully frank therapist named Dr. Ruth Westheimer. Today, young people know everything, but live their lives in the metaverse.
Where will babies come from? I’m not sure, but I recommend Facebook send Dr. Ruth an Oculus Quest 2 and set up a virtual strategy session, pronto.
Write to Jack Hough at firstname.lastname@example.org