It's going to be years before the metaverse becomes what many hope it will be. There's a lot of development needed to make it happen, including software and devices.
In the meantime, though, several companies should profit from its early stages. Here are two metaverse stocks, in particular, that could make you richer in 2022.
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1. Nvidia
Mark Zuckerberg, CEO of Meta Platforms (formerly known as Facebook), specifically mentioned one name earlier this year when discussing other companies that could be big winners in the metaverse. That one name was Nvidia (NVDA -5.20%). But while Meta Platforms won't make significant revenue from its metaverse efforts soon, Nvidia will.
Zuckerberg spoke about Nvidia in connection with the graphics chips that will be needed to power the virtual reality apps in the metaverse. He's right that this should present a tremendous long-term growth market for Nvidia. The chipmaker also has a big opportunity in the near term.
Nvidia's Omniverse is already gaining momentum. Omniverse is a development platform for 3D simulation and design collaboration. Big companies including BMW and Siemens Energy are using Omniverse to develop digital twins of their facilities. Studios are using the platform for virtual production. Architectural and engineering companies are using it to design buildings.
Another key opportunity for Omniverse is its Avatar platform. Omniverse Avatar enables designers to build interactive artificial intelligence (AI) assistants. These avatars could be used for nearly any customer service interaction. Nvidia CEO Jensen Huang thinks the addressable market for Avatar is close to $40 billion. To put that number into perspective, Nvidia has generated $24.3 billion in revenue over the last 12 months.
Sure, this tech stock appears to be expensive, with shares trading at nearly 59 times expected earnings. However, the growth prospects for Nvidia warrant a premium valuation. Even after more than doubling this year, the stock should still be a winner in 2022 and beyond.
2. Unity Software
Unity Software (U -1.54%) stands out as another company that could profit from the metaverse sooner rather than later. Back in the gold-rush days, the biggest winners were those who sold picks and shovels to gold miners. Unity is basically a picks-and-shovels supplier for the metaverse, and for virtual reality apps in general.
The company currently ranks as the leading platform for developing interactive real-time 3D content. Close to 65% of the top 1,000 mobile games in the world were created using Unity's software.
Unity CEO John Riccitiello plans for his company to achieve a similar dominance in metaverse content. During Unity's third-quarter conference call, he said:
Unity expects to be -- as industry after industry after industry wants to move into the metaverse or become real-time 3D interactive with their presentation, whether it's a car configurator or a shopping experience -- we want to make sure that 60%, 70%, 80% of the time, that content built by all of those industries and all of those customers is built in Unity.
Although it will take several years to fully build the metaverse, the effort is already underway. Unity should be able to make money from the earliest stages of the metaverse.
The stock's performance has been disappointing in 2021, with shares now slightly below where they were in early January. A key reason behind this decline was that Unity's valuation soared too much too fast in 2020. But with developers needing the equivalent of picks and shovels to build the metaverse, Unity could be in a good position to rebound in the new year.
