Virtual reality (VR) is already a multibillion-dollar business, but it has only scratched the surface of its potential. According to Statista, in 2018, 4.7 million headsets were sold worldwide, and that was before the launch of several more-affordable full VR headsets in mid-2019. 

As the cost comes down and the technology improves, here are the players you need to know in virtual reality, and where they stand in the industry. 

Woman using Oculus Quest at home.

Image source: Oculus.

The headset "platform" companies

The goal of every big hardware company getting into virtual reality is to build a platform. They want to become what Windows is to PCs or iOS is to mobile, sitting between the content creators and the users, and extracting a piece of value from every interaction.

So far, no one has yet built a defensible platform, but the best known of the contenders attempting to is Oculus, which is owned by Facebook (META 0.44%). Its Oculus Rift S, Go, and Quest headsets each run on a similar operating system. Users can purchase experiences on the headsets or on a mobile app, and the Oculus operating system is what runs the software as well. 

Sony (SONY 1.51%) actually has sold the most headsets overall so far -- 4.2 million as of March. Its PSVR headset isn't as powerful as higher-end devices, but it connects to the widely installed PS4, and it's an inexpensive addition to the console's kit, which is a big reason for its success. Like Oculus, PSVR is easy to use and includes a platform that connects consumers with developers. 

The most complex of the platforms is Steam VR, which is owned by Valve. It's essentially just a VR platform that will run either files downloaded from Steam or executable files downloaded from the internet. In that respect, Steam gives developers a way around its platform to reach consumers directly. One difference between Valve's strategy and those of its rivals is that, until recently, Valve had only made limited hardware, most notably the external lighthouses used to track the locations and orientations of headsets and controllers. That changed recently with the launch of the Valve Index headset and controllers. 

Taiwanese consumer electronics company HTC is the final big name in VR hardware -- it manufactures the Vive and Vive Pro headsets, which were launched at the same time as Oculus Rift. Vive has aimed its products primarily at the high-end enterprise market, and accordingly, it charges more for its gear than Oculus, Sony, or Valve. What's notable about HTC is that it uses Steam VR as its operating platform, which puts it in a vulnerable position now that Valve is selling arguably better equipment at lower prices. 

The platform and hardware makers are trying to build their user bases as quickly as possible to try to become the platform of choice for developers and users. Sony has a lead, but I would argue that Oculus should take over the No. 1 spot soon now that the $400 Oculus Quest is on the market. 

The power behind VR

Whether they are housed within the VR headset or in an external computer, GPUs drive the quality of the VR experience. An underpowered graphics card can cause the visuals to lag, or even crash the system. Today, NVIDIA (NVDA -3.54%) is the go-to graphics card provider for VR computers: Its the GTX 1080 was the favorite, and its newer RTX 2080 is now a popular choice. For high-end VR, NVIDIA remains the chipmaker most associated with good performance.

However, AMD (AMD 4.62%) is making a serious effort to catch up. Its new 7 nm Radeon 7 GPU stacks up fairly well against the GTX 2080 on performance metrics, so it should gain some market share. If AMD keeps investing in graphics card development, it may become NVIDIA's biggest competitor in this space over the long term. 

With mobile devices becoming more common, we're starting to see new chipsets in headsets because the traditional VR graphics cards are too big, run too hot, and consume too much power to include in an untethered headset. So mobile-device-centric chips like the Qualcomm (QCOM -5.12%) Snapdragon 835 are now powering mobile VR headsets. The trade-off is that these chips don't have nearly as much computing power as the traditional GPUs, but that's something designers have to accept in untethered devices. For Qualcomm, it gets them into a rapidly growing part of the VR business. 

The big content players aren't investable yet

I've focused so far on headset makers and the software and platforms they're building, but in VR, the content will ultimately be the most important thing for users. However, most great VR content today is being made either by small, nonpublic companies or massive ones for which VR generates such a small portion of revenue that it doesn't appreciably move the earnings needle. 

For example, Job Simulator is one most popular and highest-grossing VR titles of all-time, and it's owned by Alphabet's Google. But Google isn't investing much in VR and the few million dollars a year that Job Simulator makes is insignificant for the company. On the other side of the industry is Beat Games, the maker of the wildly popular Beat Saber, which is still privately held. 

Until midsize companies like game designers Activision Blizzard, Electronic Arts, and Take-Two Interactive get into the industry, there won't be many ways for investors to get real portfolio exposure to the VR content segment. 

Where to invest your VR dollars

The three companies that have the most riding on VR today are NVIDIA, Sony, and Facebook. They've all invested heavily in becoming industry leaders, and each has a significant lead over its competition in its arena. As VR goes more mainstream, these are the companies to put on the top of your watch list.