Virtual reality (VR) is in its nascent stages, and by most measures, it's still an unproven market. Markets and Markets research estimates it could be worth $33.9 billion by 2022, but even the most visionary tech leaders like Facebook (NASDAQ:FB) CEO Mark Zuckerberg think we may still be five to 10 years away from VR truly taking off.
So what's a tech investor to do? Wait too long and you could miss out on VR's growth, but jump into the wrong company now and you could be throwing your money away. Investors looking to benefit from VR's massive potential but who don't want the volatility that could come from VR pure plays should consider Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Facebook, and NVIDIA (NASDAQ:NVDA). Each company is poised to gain from virtual reality's growth -- but won't leave you high and dry if VR takes a while to take off.
1. Facebook's VR focus
A few years ago, Facebook became the poster child for major tech companies betting on the future of virtual reality. It happened when the company paid $2 billion for the VR company Oculus, and since then Facebook has been pretty vocal about the possibilities of the technology.
"This is a good candidate to be the next major computing platform. It's worthy of a lot of investment over a long period," Zuckerberg told Bloomberg last year.
The company showed off its new Facebook Spaces app at its F8 developer conference last month, which allows users to interact with their friends in a virtual world using VR headsets. The app is in beta right now, but it's one of the first indications of Facebook's plans for VR software.
Last year, Zuckerberg said, "The next phase is building the next great software experiences." And with the reveal of Facebook Spaces, it's clear that the company is already stepping into the next stage of its VR plans.
2. Alphabet's software play
Facebook's received a lot attention for its VR pursuits, but I don't think investors should underestimate Alphabet's potential to dominate.
You might know about Google's initial foray in into VR with Cardboard, which was essentially a stripped-down VR headset powered by a user's smartphone. The company upgraded that a bit when it launched its Daydream View late last year, which is higher-end version of Cardboard and comes with its own VR handheld controller.
But the company's real potential in VR comes from its software opportunities, and right now Google is pursuing two of them. The first is its Daydream VR hub that allows smartphone users to discover and download VR apps and content on their devices. It's still in its infancy, but Daydream already has more than 100 apps.
The second opportunity is an Android-based VR software platform that will come out later this year for developers. Instead of running on a smartphone, this Android-based platform will run exclusively on VR headsets. That means that Google could soon be powering VR headsets that don't require any sort of tethering to a PC or smartphone.
It's not hard to imagine the possibilities here. If Google nails VR software in the same way it did with Android, then the company could easily bring in ad and app revenue from the VR market.
3. NVIDIA's VR processor play
And last, but certainly not least, is graphics-processor maker NVIDIA. The company is best known for its gaming graphics processing units (GPUs) and makes about 58% of its total revenue from that segment.
NVIDIA's potential in VR is huge mostly because it dominates the discrete desktop GPU space, claiming 70.5% of the market. Rival Advanced Micro Devices follows in a very distant second place with 29.5%. NVIDIA's been betting that its graphics cards will benefit from the growth of VR and already has a slew VR-ready cards on the market.
The company isn't just creating the hardware for VR, through; it's also released developer tools and apps to help VR content creators best use the company's processors when creating VR content.
NVIDIA's advantage in the space is that it's the go-to GPU maker for high-end graphics cards. Jon Peddie Research said last year that, "In the PC market, NVIDIA has a substantial market share in enthusiast graphics boards, the type needed for Oculus and HTC VR experiences."
That should bode well for NVIDIA as it takes on the high-end VR market, but the company's VR-ready graphics cards for notebooks should also help NVIDIA tackle the more entry-level VR space as well.
It's worth noting here that NVIDIA is looking fairly expensive for new investors right now. The company's forward P/E ratio hovers above 30, compared to the tech average of about 25. But for current NVIDIA investors, the company's place in the GPU space means it's a VR bet you likely won't have to babysit anytime soon.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and Nvidia. The Motley Fool has a disclosure policy.