The problem with investing in the metaverse right now is that it's difficult to identify which companies are going to benefit the most on the consumer side. For example, Facebook parent Meta Platforms could be a big winner with its Oculus virtual reality technology, but the social media leader has been investing in that business for eight years without much to show for it. For investors, there are more immediate opportunities available.
It could take two decades of build-out before the metaverse is widely used by the general public -- that's about how long it took for mobile phones and social media to move from their early-adoption phases to mainstream ubiquity. And before that can happen, vast numbers of new cloud servers and edge servers will need to be deployed, and other new software and hardware to support immersive 3D experiences will need to be developed and installed.
Image source: Nvidia.
That's where Nvidia (NVDA 6.18%) and Micron Technology (MU 2.92%) come in. Nvidia is already experiencing booming demand for its graphics processors, which help to power the world's cloud infrastructure. Micron is seeing strong demand from data centers that need to expand memory and storage capacity.
As such, Nvidia and Micron might be the best stocks to buy for those looking to profit from the growth of the metaverse over the next decade. Let's find out a bit more about these two stocks.
1. Nvidia
Nvidia is perfectly positioned to meet the hardware demands that the metaverse will require. It's not only a leading seller of graphics processing units (GPUs) to the gaming and data-center markets, but it's now leveraging those capabilities to power its own 3D-design platform, which could earn it billions of dollars in incremental revenue.
Last year, the GPU specialist unveiled Nvidia Omniverse, which aims to serve millions of designers and creators working on 3D design projects around the world. Anyone with an RTX-powered laptop can use Nvidia Omniverse, though enterprises must pay a licensing fee.
CEO Jensen Huang has previously called Omniverse "one of the largest graphics opportunities that we've ever seen," and it's easy to see why looking at the company's latest results.
It's still early, but growth in Nvidia's professional visualization segment, which includes Omniverse, has started to accelerate. In its fiscal 2022 fourth quarter, which ended Jan. 30, professional visualization revenue more than doubled year over year to $643 million.
Nvidia's total revenue grew 61% in its recently ended fiscal year to a record $27 billion. The company is capitalizing on rising demand for applications that require high-performance hardware, such as artificial intelligence systems. Now, it has another substantial revenue stream waiting in the wings in its Omniverse licensing fees.
2. Micron Technology
Micron is one of the leading suppliers of flash memory and storage technology. It specializes in non-volatile memory (NAND) in solid-state drives, but most of its revenue comes from selling dynamic random access memory (DRAM) chips.
Demand for these products extends across numerous markets, including gaming and smartphones. But Micron is seeing growing demand from the data center market -- the largest consumer of memory and storage chips -- and management expects data center growth to outpace that of other markets over the next decade.
Micron got off to a strong start in its new fiscal year. Revenue rose 33% year over year in the first quarter of its fiscal 2022, which ended Dec. 2. The company should continue to benefit from the increasing chip content in 5G mobile devices, but management is starting to talk about the metaverse as an emerging opportunity.
"The build-out of immersive virtual worlds often referred to as the metaverse will offer even more opportunity due to the intensive use of significant memory and storage in these applications," CEO Sanjay Mehrotra said on the fiscal Q1 earnings call.
Any investors who are uncomfortable buying Nvidia shares at their current high valuation of 61 times earnings should find Micron's price-to-earnings ratio of 13.9 much more attractive. That is a bargain, given that Micron's revenue has increased every year since 2014, and it has tremendous opportunities for more growth.
