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Should You Invest in the Metaverse or Is This an Overhyped Buzzword to Avoid?

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Corporate history is littered with promising tech ideas that never really panned out as advertised.

According to semiconductor company Nvidia (NVDA -1.23%), "The metaverse is a shared virtual 3D world, or worlds, that are interactive, immersive, and collaborative." It's a futuristic vision that has been a staple of science fiction for decades, and the prospect that technology has reached the point where it will soon be viable has captured the imagination of many investors. 

But is the metaverse trend investable? That's the question posed to Fool contributors Jon Quast, Travis Hoium, and Charlene Rhinehart in this video clip of Motley Fool Backstage Pass, recorded on Jan. 6. Here's what they had to say.

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Jon Quast: Everybody's favorite buzzword -- especially if you're a public company -- and that is "the metaverse." At the Consumer Electronics Show again, many companies are debuting new products that are designed to be more in the augmented reality, the virtual reality headsets. Think of these as your doorways, your gateways, into what is the metaverse.

Real quick, maybe I shouldn't take for granted: Do we all know what the metaverse is, what we're talking about? Travis, how would you define the metaverse? Don't mean to put you on the spot.

Travis Hoium: I think anybody who says they know exactly what the metaverse is, is lying. [laughs] But it's this digital space that we're going to be able to be part of. I think we will look back and say that this conversation that we're having right now is a bleeding-edge piece of the metaverse. But maybe in 10 years, it'll recognize our entire bodies, and we'll be sitting at a [virtual] coffee table or something like that.

But I think that's the way to think about it, is that it's these digital advances that have been taking place for 30 years, they're just now moving into sort of this interesting different space where you can be embodied in AR, VR, other technologies.

Quast: Charlene, anything to add?

Charlene Rhinehart: I see this interconnected world of virtual communities, so instead of just looking at the internet, we're actually inside the internet, and this could change how we work, play, live, breath, eat, because everything will be right there.

Hoium: That's much more concise. [laughs]. That's what I meant to say.

Quast: You're both hitting on the same thing. It's how Nvidia defines it. It's a shared virtual world where you can interact with each other, and you can buy and sell things, you can talk -- all that stuff. It's the real buzzword ever since Facebook changed its name to Meta Platforms -- really, that's where it kind of hit a frenzy. And companies like Panasonic, Sony, TCL -- they were all debuting new products at the Consumer Electronics Show, new headsets, new ways to access the metaverse. The rumors are that Apple is actually building out its own headset, and that's going to be its next big product, is an Apple headset to access the metaverse.

My question to you guys here is: Is this buzz or is the metaverse actually investable right now? Because we've seen a lot of things hyped in times past that eventually did come to fruition, but not how were they were hyped up, and they were never really investable at the time that the buzz was hitting the absolute frenzy.

Charlene, what do you think: Is this investable?

Rhinehart: Metaverse, it's very intriguing. Honestly, I thought that it was was just a fad, but as I see more companies getting into this space, trying to claim their stake in this space, I'm doing more research. I actually have the Oculus Quest right now because I want to dive into the metaverse a bit and see what it's all about. But it is interesting to see that a lot of your top companies, those $1 trillion, $2 trillion companies are making their way into the metaverse. Nike is creating footwear and apparel in the metaverse. Then you have virtual concerts taking place in the metaverse. I also read an article about a couple who got married in the metaverse and paid for it with crypto. Now, it's not legal yet to just have a wedding solely in the metaverse. But it's a very interesting concept. Is that the direction we're going in after this pandemic? Are we more comfortable with that idea?

Right now, what I'm doing is, I'm diving in, personally, just to see what it's about. I'm also paying attention to the moves that these major companies are making. Amazon, Nvidia -- I'm paying attention to what they are doing so that I can determine the direction I want to go with in the metaverse. But it seems that it is about to be another way that people make money.

Quast: Travis, you have a list of the overhyped terms of yesteryear from the CES.

Hoium: I went back through .... Everybody does these articles about "Here's what's going on in CES this year." This is just the last five or six years. We had curved TVs, 5G, e-scooters. The Internet of Things -- that's sort of like the metaverse to me: I don't know exactly what that is, but we're probably doing it. Drones, AR in 2018, VR in 2016, the smart home. Self-driving cars -- that goes back to 2015. So a lot of these things that are happening today were topics at CES five, 10 years ago. They just, like Jon said, they are not happening the way that they were necessarily billed.

I think that's one of the things that we're going to see with this metaverse concept, is companies like Meta are talking about it. I would take a bet that Meta is not going to be a leader in the metaverse 10 or 20 years from now. It goes back to what I said earlier, because what they do is social media. They would have to basically say, "We're going to give up social media and focus on creating something completely different." I think the companies that are going to dominate the metaverse are companies that we haven't heard of yet or are very small right now.

What I'm thinking about in the metaverse is: Where are the infrastructure pieces? When you're building a 3D world, so whether that's Charlene trying something in VR or you're buying an NFT [non-fungible token] that gives you access to an online world that's a small community. Those things are typically built with Unity. So that's an infrastructure play on the metaverse. Apple is another infrastructure play. Everything in the metaverse, and Web3, and crypto, is being built on the assumption that you already have a smartphone. Nobody's building their own new smartphone.

I think that's the best way if you want to invest specifically in the metaverse right now is thinking about what are the assumptions that are being built on top of, and not necessarily who are the winners, because I don't think those companies are probably public yet.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Charlene Rhinehart, CPA owns Amazon, Apple, and Meta Platforms, Inc. Jon Quast owns Unity Software Inc. Travis Hoium owns Apple and Unity Software Inc. The Motley Fool owns and recommends Amazon, Apple, Meta Platforms, Inc., Nike, Nvidia, and Unity Software Inc. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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