Few buzzwords have captured the imagination of investors like metaverse. As with most trends, we will have to see if the hype exceeds the reality when it comes to how large a role the metaverse will play in our future. One way to look for investments in this space is to start with companies that are strong, established businesses with optionality. 

There are two companies, in particular, that I think are smart choices for those who want to invest in the metaverse, and their recent earnings results make me confident each is poised for a strong performance in 2022.

Two people sitting on the floor, playing video games.

Image source: Getty Images.

1. Nvidia: A key component in the engine driving the metaverse

Nvidia (NVDA 1.99%) has become such an important part of the technology sector that there's hardly anything its products don't affect in some way. Nvidia designs graphics chips (graphics processing units or GPUs) that are used in gaming, professional visualization, data centers, and the automotive industry. Nvidia is able to benefit from its customers' investment in the metaverse in several ways.

One area where the metaverse is already taking hold is in gaming. When Nvidia recently released its Q4 and FY 2022 earnings, its gaming segment set Q4 and fiscal year records for revenue. For Q4, revenue was $3.4 billion, a 37% year-over-year increase, and for FY 2022, revenue came in at $12.5 billion, a 61% improvement over 2021. It's clear Nvidia has GPUs that are favored by the industry and the company should be at the forefront of any advancements that make gaming in the metaverse a priority for consumers.

Nvidia's professional visualization segment provides products that help companies implement augmented and virtual reality solutions in their industries. For example, Sony Pictures uses Nvidia graphics cards for rendering-related applications, and Duke Energy is using them to help map and maintain its energy facilities. Revenue in this segment rose 109% year over year in Q4, showing Nvidia's prominence in this space.

With a price-to-sales ratio of 22 and a price-to-free-cash-flow ratio of 73, Nvidia is trading at the same multiples as in the summer. The stock isn't cheap, but with so many ways to ride the metaverse tailwinds, the shares are worth paying a premium for.

2. Microsoft: All-in on metaverse-level gaming

With its intention to acquire video game developer Activision Blizzard (ATVI), Microsoft (MSFT 0.99%) is going all-in on the metaverse through its gaming division. Management thinks this acquisition will help the company as it looks for ways to provide the building blocks for the metaverse across its PC, console, and cloud platforms. 

In the recently reported second quarter of fiscal 2022, Microsoft's gaming revenue was $411 million, up 8% year over year. This is still a small portion of the personal computing segment's revenue, which came in at $2.3 billion in Q2. This will change once the acquisition of Activision Blizzard closes, as Activision's Q4 revenue was $2.1 billion.

This acquisition will also bring some very popular video game titles under Microsoft's roof. With Call of Duty and World of Warcraft joining Microsoft's Halo and Minecraft franchises, Microsoft will have millions more users to engage with and market its metaverse ambitions to. Additionally, these new gaming titles could be formatted to work with Microsoft's VR goggles in time as the company's metaverse ambitions play out.

Microsoft's Q4 results were impressive on all counts, and even with a post-earnings bump in share price, Microsoft stock still trades at only 12 times trailing sales and 36 times its free cash flow, both multiples near where they were in the summer. For investors who believe the Activision Blizzard acquisition will supercharge Microsoft's metaverse ambitions, now may be a good time to grab some shares.