The global virtual reality market is expected to more than triple over the next seven years, expanding from $21.83 billion to $69.6 billion by 2028. As a technology perennially on the horizon (sound familiar, fully autonomous vehicles?), it's perhaps tempting to write off VR as an interesting but unproductive area of focus. That would be a mistake. Nearly all the Big Tech companies are investing in VR and augmented reality, and the prohibitive prices and clunky gadgets that made the area a niche industry for hobbyists are making way for affordability and user-friendliness. Here are seven of the top virtual reality stocks to watch today.
In Facebook's (FB) last earnings call, CEO Mark Zuckerberg went full "metaverse," describing in glowing terms a future where people can work, play and live in a digital world via avatars. To that end, Facebook hasn't been merely talking the talk: The 2014 acquisition of Oculus set the stage for Facebook's leading position in the VR headset market today. A June report from research firm IDC noted that Oculus was "single-handedly" driving growth in the global VR headset market. Its $299 price tag makes Facebook's Oculus Quest 2 the most affordable mainstream headset on earth, with that accessibility yielding an early lead in market share, and with it, early VR developers creating an influx of new games. It's the sort of "flywheel effect" that compounds on itself and should result in Facebook securing a stronghold in the industry for years.
Sony Group Corp.
While Facebook's Oculus Quest 2 makes the social media giant one of the hottest virtual reality stocks to watch in the coming years, Sony (SONY) is no slouch. In fact, its PlayStation VR headset is, according to the most recent publicly available info, the single bestselling VR headset of all time, with sales eclipsing 5 million units through the beginning of 2020. All indications point to Facebook seizing the momentum there – 2021 estimates have Oculus selling at three times the rate of the PSVR, and IDC estimates Sony took the fifth spot in global shipments in the first quarter – but the PSVR's compatibility with the PlayStation 4 and newer, faster PS5 console is a formidable combination. Sony's largest direct competitor in video games, Microsoft's Xbox product line, has no VR compatibility, so the consumer gaming market is Sony's to lose.
While Sony may be playing solo when it comes to VR tie-ups with the console market, Microsoft (MSFT) isn't simply sitting back and letting a nascent, promising tech market get gobbled up by competitors. Instead of the consumer angle, Microsoft is going after what could be bigger fish: the enterprise space. In fact, in March, the company inked a five-year deal with the U.S. Army – with the potential for an extension for another five years – worth up to $21.9 billion to supply Microsoft HoloLens headsets to the military. The "mixed reality" headsets incorporate augmented reality, or AR, to aid humans in tasks and efficiency, with models running from $3,500 to about $5,000 per device. The modified versions almost certainly cost multiples of that, and with Microsoft already proving the HoloLens is worth billions of dollars to the U.S. military, the product's commercial applications in other fields – think health care and manufacturing – could also represent huge markets.
It's perhaps little surprise that Alphabet's (GOOGL) Google is a leader in VR and AR. Those following the space will recall the search giant's bungled entry into AR visual overlays via the 2013 release of Google Glass. The product has since gone through several iterations and today is relegated to the enterprise space. But Google's early commercial experimentation has been followed by novel applications such as Google Lens (visual search); overlays in Google Maps; a burgeoning field of virtual reality YouTube creators; and software like Google Earth VR, which lets Oculus Rift users virtually explore anywhere in the world. As this technology gets better, expect Google to remain a major player among VR stocks and AR leaders.
Apple (AAPL), the most valuable publicly traded company in the world at more than $2.5 trillion and a member of the vaunted FAANG stocks contingent, has the kind of resources most companies in this space could only dream of. Plus, it has a devoted army of developers building AR applications for its ubiquitous App Store. Listing Apple as one of the top VR stocks could arguably be premature, given that the company hasn't actually broken into virtual reality yet, but that's just because Apple hasn't yet perfected such a product. The popular Apple-tracking website MacRumors recently reported speculation that the company has hundreds of people quietly working on multiple products, including an AR- and VR-compatible headset and AR glasses. No matter the truth to the rumor, you can safely bet that Apple has learned from rivals' previous missteps in this area. It's possible one of these products could launch as soon as 2022.
Another clever way to invest in virtual reality is not to buy the VR companies themselves but to purchase shares in derivative players whose products make the tech possible. That includes buying the semiconductor stocks that supply chips for the VR devices. Enter Qualcomm (QCOM), a $160 billion supplier to previous companies on this list, including Facebook's market-leading Oculus Quest 2, which uses the Qualcomm Snapdragon XR2 Platform. Qualcomm's newest extended-reality chips work with 5G and allow for a harmonious combination of artificial intelligence, 5G, and virtual and augmented reality to enable experiences that consumers currently can't even imagine. If you're a believer that VR will be dominated by mobile devices, QCOM is a wise way to bet on that eventuality.
The "reality" part of VR relies heavily on compelling graphics that make virtual experiences seem real. Chipmaker Nvidia (NVDA) is the best of the best in that department, with its top-end graphics processing units, or GPUs, essentially considered must-have components for high-end gaming devices. That includes VR headsets, with Nvidia’s Turing GPUs and GeForce RTX GPUs at the cutting edge. Nvidia boasts a VRWorks suite that gives developers tools to build VR apps, and in its latest earnings announcement, the company touted the release of Nvidia Omniverse. CEO Jensen Huang described it as "a simulation platform nearly five years in the making that runs physically realistic virtual worlds and connects to other digital platforms." He sees the platform enabling "digital twins and industrial metaverses."
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