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Metaverse tipped for bigger role in portfolios

As the universe of companies exposed to the metaverse expands and evolves, stock selection will be crucial to capitalise on this trend, says Axa Investment Managers (Axa IM).
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Identifying the winners and losers in the metaverse is perhaps more important than for any other long-term growth theme given its likely impact on everyone’s daily lives.

“Whether it is socialising, gaming, working or industry, or something else yet to be developed, we believe that the metaverse can bring people together in new ways,” said Pauline Llandric, portfolio manager at Axa IM.

Research estimates the metaverse-related market, worth around $500bn in 2020, could grow to $685bn in 2022 – and the sector as a whole could reach nearly $800bn by 2024, according to Bloomberg Intelligence.

Being at the early stages of what will become a long-term and rapidly growing trend creates potential for a broad range of global companies and, in turn, investment opportunities, explained Llandric.

According to Axa IM, these exist in four main sectors across the metaverse: gaming, socialising, working and enabling.

Growth by gaming

Considered as an initial building block of the metaverse, the market relating to gaming offers attractive opportunities. For example, said Llandric, the number of virtual and augmented reality headsets that are shipped is expected to more than quadruple from four million in 2021 to 42 million by 2025, according to IDC and Credit Suisse.

She also highlights investment potential in companies providing the software to power virtual worlds.

Further, some of the more popular gaming companies have created partnerships with large consumer goods brands to enable players to buy virtual items for avatars.

Social evolution

Llandric also sees socialising as a fundamental pillar of the metaverse. “We expect to see continued developments in this space as individuals seek greater opportunities to connect.”

Significant capital investments in artificial intelligence and machine learning reinforce this, with audiences keen to enjoy new virtual experiences.

New ways to work

The metaverse also has the potential to redefine the future of work, allowing people to meet and collaborate in a more immersive way.

“We are likely to see this in offices and hybrid working models where employees work from home and connect and collaborate online,” explained Llandric.

Virtual reality also allows strides to be made in areas such as healthcare, manufacturing and engineering – where prototypes can help make the design process more cost-effective, efficient, safer and allow even greater innovation.

Enabling the metaverse

Finally, to support and drive the various metaverse trends, Llandric points to the semiconductors, network infrastructure providers and technologies that enable apps to run, as well as to digital payment companies and cyber security firms.

“Enablers will be key to support the pace of development for the metaverse, including reliability, latency (how fast data can travel) and bandwidth,” she added.

Part of the Mark Allen Group.