According to McKinsey & Company, the metaverse is the emerging 3-D-enabled digital space that uses virtual reality, augmented reality, and other advanced internet and semiconductor technology to allow people to have lifelike experiences online.
The basic features of the metaverse include a sense of immersion, real-time interactivity, and user agency. Whereas, the full vision of the metaverse encompasses platforms and devices that work seamlessly with each other, the possibility for thousands of people to interact simultaneously, and use cases well beyond gaming. While the phenomenon gained attention in 2021 with internet searches for the term increasing by 7,200%, it seems here to stay. With lockdowns and work-from-home policies in place, the interest in shared virtual environments spiked. The opportunity remains vast with metaverse having the potential to generate up to $5 trillion in value by 2030.
Is the Metaverse Still Alive?
When the tech guru Mark Zuckerberg changed Facebook’s name to Meta in 2021, he clearly drove the metaverse narrative in the world. Although the vision of a digital future of work and recreation became a buzz for a while, other emerging technologies such as Artificial Intelligence decided to dominate the headlines later.
Questions regarding whether Zuckerberg should have transformed a successful social media company into a VR venture have also been asked. In September 2023, BBC reported that his company’s virtual and augmented reality branch, Reality Labs, has lost $21 billion since the prior year. The firm later introduced its social virtual reality space Horizon Worlds. While some users have complained about not having enough people to make it fun, the platform’s monthly users can simply not match the number of people who consume social media like Facebook and Instagram every day.
Although the company’s virtual reality headset and its Horizon Worlds have not gone mainstream after 3 years of the company’s founding, experts argue that the metaverse is still as relevant as ever. On October 2, CNBC reported that Zuckerberg’s metaverse is finally showing signs of life as his company might have found its footing in VR and AR through a different medium, smart glasses. After the firm witnessed early success in the market for smart glasses via a partnership with Ray-Ban, the CEO unveiled the first “fully-functioning” prototype AR glasses, Orion, in September.
“The right way to look at Orion is as a time machine. These glasses exist, they are awesome and they are a glimpse of a future that I think is going to be pretty exciting.”
Although there might be a lack of connection between the metaverse which was the next big thing two years ago and the prevailing tech landscape dominated by AI, some argue that the reports of the metaverse’s death are ‘exaggerated’ and that it is a rather long-term concept to materialize as a digital future for masses.
Our Methodology
In order to compile a list of the 10 best metaverse stocks to buy according to hedge funds, we first used stock screeners, ETFs, and online rankings to make an extended list of the relevant companies. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best metaverse stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Apple Inc. (NASDAQ:AAPL) which is well known for its smartphones, also makes the hardware that blends the digital and the virtual world. While the Mac introduced Apple to personal computing, and the iPhone introduced it to mobile computing, the firm stepped into the metaverse as it debuted its virtual reality headset.
The iPhone maker launched its Vision Pro headset at its annual WWDC event in June 2023. As a revolutionary spatial computer that seamlessly blends digital content with the physical world, the firm claimed the device as to be years ahead and unlike anything created before. It builds upon Apple’s innovation and experience designing high-performance products such as the Mac, iPhone, and wearables like the Apple Watch.
For its fiscal 2024 fourth quarter ended September 28, Apple Inc. (NASDAQ:AAPL) reported revenue of $94.9 billion, a record September quarter revenue driven by iPhone. Additionally, Apple’s active installed base of devices hit a new all-time high across all products and all geographic segments. During the quarter, the firm was excited to announce the new iPhone 16 lineup, Apple Watch Series 10, and AirPods 4.
Thus, Apple Inc. (NASDAQ:AAPL) is set to benefit from its leading innovation, expertise, and a potential surge in demand for AR/VR devices with the growth in the metaverse. The stock is held by 184 hedge funds, as of Q2.
Overall, AAPL ranks 3rd on our list of the best metaverse stocks to buy according to hedge funds. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
