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2 Stocks to Invest in Virtual and Augmented Reality

By Trevor Jennewine – May 11, 2021 at 9:11AM

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These burgeoning technologies could see major adoption over the next decade.

Augmented reality (AR) and virtual reality (VR) promise to change the world by enabling new types of immersive experiences. While still in the nascent stages today, both of these technologies could become as common as smartphones over the next decade.

According to Boston Consulting Group, the AR/VR market will expand by 113% each year through 2024, reaching $297 billion. That incredible growth rate offers investors a potentially big opportunity. So how can they capitalize on it?

The best strategy is to invest in companies that enable or benefit from these technologies, especially those that use AR or VR to differentiate their business. Specifically, investors should consider Adobe Systems (ADBE -1.10%) and Microsoft (MSFT -1.94%). Here's why.

Person wearing augmented reality glass, viewing digitally projected display of applications.

Image source: Getty Images

Adobe

Adobe has deep roots in creative content. For instance, it released the first version of its Photoshop software in 1990. And in the three decades since, the company has become a $230 billion software titan.

Today, Adobe Creative Cloud offers a range of tools for artistic professionals: Photoshop for image editing, Illustrator for graphic design, Premiere Pro for film editing, and After Effects for motion graphics. Notably, all of these are considered industry standards, as are many other Adobe applications.

In 2019, the company launched a new Creative Cloud product: Adobe Aero. This application makes it possible to blend the physical and digital worlds, allowing creators to build and share immersive AR experiences without a single program.

Moreover, Aero supports integrations with other Adobe products. For example, creators can build 3D objects in Adobe Dimension, paint and texturize the objects with Adobe Substance, then upload the object into Adobe Aero. Alternatively, Adobe Medium allows creators to design 3D models in a VR environment, powered by Facebook's Oculus Rift headset.

Adobe is also experimenting with other use cases for AR technology. For instance, Project Glasswing is a display prototype -- picture a clear pane of glass -- that combines tools like Photoshop and After Effects with the real world. For instance, the Glasswing display could be placed in front of an object, allowing the viewer to overlay digital Photoshop edits or After Effects graphics on the physical world.

Here's the takeaway: Given Adobe's history of excellence in creative content, it seems likely that this company will play a significant role in the AR and VR industries.

Microsoft

Microsoft is one of the largest enterprises in the world. Its Office software suite has an incredible 90% market share, and its collaboration platform -- Microsoft Teams -- has seen significant adoption during the pandemic, reaching 145 million daily active users in the most recent quarter.

Currently, Teams powers interaction through text, voice, and video, and it allows users to share and edit files in real time using apps like Word or PowerPoint. But the company recently introduced a new product at its annual Ignite conference that could take collaboration to the next level.

Woman viewing a holographic automobile.

Image source: Getty Images.

Microsoft Mesh is a mixed reality platform powered by Azure. It allows people to interact through shared holographic experiences. Specifically, Mesh uses 3D capture technology to render lifelike projections of people and objects in a virtual scene.

In other words -- with wearables like the HoloLens 2 -- an engineering team could gather virtually and collaborate on a holographic vehicle design. Employees and students could attend meetings and classes virtually, interacting with peers as if they were in the same room. Friends and family separated by distance could do the same thing, creating a more personal experience than video conferencing ever could. The possibilities are endless.

Notably, the nonprofit group OceanX will use Microsoft Mesh to construct holographic laboratories aboard its research ship, OceanXplorer. This will allow remote scientists to holographically teleport onto the vessel, where they will be able to participate in discussions and witness discoveries as if they were physically on the ship.

Going forward, Microsoft plans to integrate Mesh with products like Teams and Dynamics 365. The company will also provide developers with AI-powered tools, enabling them to build applications on the Mesh platform.

Looking to the future

Investors should note that neither of these tech companies generates much revenue from AR or VR products, but every new technology starts as a small idea. That's why, over time, I believe both Adobe and Microsoft could play a significant role in this industry. 

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine owns shares of Adobe Systems. The Motley Fool owns shares of and recommends Adobe Systems, Facebook, and Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$232.90 (-1.94%) $-4.60
Adobe Inc. Stock Quote
Adobe Inc.
ADBE
$275.20 (-1.10%) $-3.05

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