When game-changing new technologies arrive, some companies are much bigger winners than others. With PCs, Microsoft ultimately fared better than Commodore. Amazon had more success on the internet than Webvan.
You can bet that a similar story will unfold with the metaverse. Nvidia (NVDA 1.89%) and Unity Software (U 2.28%) stand out as two prominent companies vying to succeed in the coming 3D virtual reality world. But which is the better metaverse stock to buy? Here's how Nvidia and Unity stack up against each other.
Image source: Getty Images.
The case for Nvidia
With a hat tip to Charles Dickens and A Christmas Carol, there's the metaverse of Nvidia's present and the metaverse of Nvidia's future. The present version centers around Omniverse, a 3D virtual collaboration and simulation platform that Nvidia unveiled in 2020.
Omniverse is already used in a variety of ways, including designing buildings and factories and developing games. Nvidia has especially lofty ambitions for Omniverse Avatar. CEO Jensen Huang thinks the potential market for its 3D artificial intelligence (AI) assistants could be around $40 billion per year.
It's still early in the life cycle for Omniverse. The platform is arguably more important for the metaverse of Nvidia's future than it is for the company's present. However, there's an even bigger metaverse opportunity for Nvidia than Omniverse.
Nvidia's graphics processing units (GPUs) are already the gold standard for powering gaming apps. More-powerful graphics chips will be required to meet the processing demands of the metaverse. Nvidia should be in a great position to extend its current gaming dominance into the new virtual world.
Some think that Nvidia could be the biggest company in the world within a decade. The potential in gaming and the metaverse certainly factors into that opinion. Nvidia's opportunities in AI, though, weigh even more heavily.
The case for Unity Software
Two numbers arguably make the more-compelling case for Unity Software's metaverse prospects: 71% and 50%. The former is the percentage of the top 1,000 mobile games at the end of 2020 that were developed with Unity's tools. The latter is the estimated percentage of real-time 3D content today that's built on Unity's platform.
Game developers clearly like Unity. The company believes that it will be able to leverage its past success as the metaverse is built. CEO John Riccitiello wants between 60% and 80% of metaverse content to be built using his company's platform. And his goal is that Unity's technology will be used extensively for analytics, monetization, and more in the metaverse.
Unity recently completed a key acquisition that should help improve the chances of Ricciteillo's vision becoming a reality. The company's $1.6 billion deal to buy Weta Digital looks like the right move to better position Unity in addressing the artistic needs to develop metaverse content.
Weta's visual-effects technology has been used in the production of movies including Avatar, Black Widow, and the Lord of the Rings series as well as TV shows such as Game of Thrones. Until now, this technology has only been used within Weta. Unity will make Weta's tools widely available to developers of 3D content.
Unity's share price is down close to 50% below its highs set in 2021. The company's market cap now stands below $30 billion. While the stock isn't cheap, Unity should have plenty of room to run as metaverse development gains momentum.
The better metaverse stock?
My view is that both Nvidia and Unity are great metaverse stocks to buy for long-term investors. But if I could choose just one of these two stocks, it would be Nvidia.
Nvidia is poised to be a huge metaverse winner with Omniverse and its graphics chips. The company also has several other growth drivers, though, that give it an advantage over Unity. Despite its premium valuation, my view is that Nvidia remains one of the smartest picks to profit from multiple unstoppable technology trends.
