The metaverse is an emerging concept that's expected to explode thanks to its adoption in several fields -- including gaming, education, work, and entertainment -- as it will enable the virtual avatars to interact with each other in a three-dimensional, digital world.
According to a third-party estimate, the size of the global metaverse market could increase at a compound annual rate (CAGR) of 43% through 2030, reaching $1.6 trillion in size. There are quite a few ways through which people could take advantage of this emerging opportunity.
Roblox (RBLX 5.63%), Advanced Micro Devices (AMD 3.03%), and Qualcomm (QCOM 0.95%) are three companies that could win big from the metaverse. Let's see why.
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1. Roblox
The metaverse is a 3D virtual world where the avatars of real people who are located at different places on Earth will interact with each other. Metaverse users could be attending a virtual concert, or a sports event, or they may even be attending college virtually. Roblox builds these 3D virtual worlds.
The company points out that an average of 50 million people come to its platform daily so that they can "play, learn, communicate, explore, and expand their relationships in millions of 3D digital worlds that are entirely user-generated, built by our community of millions of active developers." The Roblox Studio platform enables developers and creators to make and operate 3D experiences, which can be consumed by users with the help of the Roblox Client platform on their smartphones, computers, gaming consoles, and virtual reality headsets.
As it turns out, Roblox has built a massive base of users and developers who are helping it take advantage of the metaverse already. The company had 55 million daily active users in February 2022 and it has 29 million developers on its platform, creating virtual experiences. What's more, Roblox engaged users for 41.4 billion hours on its platform last year, up 35% from 2020.
These impressive metrics indicate why Roblox is turning out to be the choice of well-known companies looking to enter the metaverse. From music concerts to car reveals to virtual stores, Roblox has been attracting diverse players into the virtual world.
As such, Roblox seems to be in a nice position to make the most of the growing demand for virtual worlds, and this should help accelerate the company's already-impressive growth. Its revenue jumped 108% in 2021 to $1.9 billion, and analysts expect the momentum to continue.
RBLX Revenue Estimates for Current Fiscal Year data by YCharts
With Roblox stock trading at 12 times sales now as compared to last year's multiple of 36, now looks like a good time for investors to buy this potential metaverse winner.
2. Advanced Micro Devices
Delivering metaverse content, such as virtual worlds, to millions of users around the globe at the same time would create a massive load on data centers. It is believed that building out the metaverse would require the kind of data center infrastructure that doesn't exist yet, supporting constant high-bandwidth data transfers.
Advanced Micro Devices is one of the companies trying to solve this problem. Meta Platforms is building what it calls the world's fastest supercomputer to tackle machine learning and natural language processing workloads to power the metaverse. AMD will provide 4,000 of its Epyc server processors for Meta's supercomputer. The chipmaker has already supplied 1,520 Epyc processors for Meta's supercomputer, with the remaining expected to be deployed by the middle of the year.
Meta Platforms believes the work done with its latest supercomputer would "pave the way toward building technologies for the next major computing platform -- the metaverse, where AI-driven applications and products will play an important role." AMD, therefore, could turn out to be a picks-and-shovels play on the metaverse as it is providing the building blocks.
The company could witness a sharp increase in the demand for its graphics cards and server processors that are used in data centers to support the growth of the metaverse. As a result, don't be surprised to see AMD's data center business -- which is on fire right now -- sustain its hot growth in the long run.
The data center business produced around 25% of AMD's revenue last year, with revenue from this segment doubling over 2020. AMD has been winning new business to support high-performance computing and supercomputing applications, which explains why the company expects this segment to record significant growth in 2022.
AMD expects 2022 revenue to increase 31% to $21.5 billion thanks to strength across all its businesses. Even better, analysts are anticipating 30% annual earnings growth from the company over the next five years. The addition of catalysts such as the metaverse could help accelerate AMD's growth and send its stock soaring in the long run.
3. Qualcomm
Qualcomm's Snapdragon processors are known for powering smartphones. The company held a 30% share of the smartphone application processor market at the end of 2021. And now, Qualcomm is pulling strings to ensure that it remains one of the top players in the metaverse as well with its chips aimed at virtual reality (VR) and augmented reality (AR) headsets.
Qualcomm has already scored an important win in the market for headsets with Meta Platforms' Oculus Quest headsets. The first Oculus Quest headset was powered by a Snapdragon 835 mobile VR chip, followed by the Oculus Quest 2, which uses a Snapdragon XR2 chipset platform. The partnership with Meta has given Qualcomm a head start in the AR/VR headset market. That's because the Quest 2 was the best-selling headset last year with a market share of 78%.
The Meta partnership places Qualcomm in a nice position to ride the growth of the AR/VR headset market that's set to expand rapidly in the long run. IDC estimates that 50 million headsets could be shipped in 2026, compared to just over 10 million units last year. Qualcomm looks set to bolster its position in the headset market further as Meta's upcoming Oculus Quest 3 is expected to be powered by the chipmaker's Snapdragon XR3 processor.
What's more, Microsoft has also tapped Qualcomm to develop custom chips for powering lightweight AR glasses that will run metaverse applications. Additionally, Qualcomm is focusing on the software side of things with the Snapdragon Spaces platform, which will help developers create AR apps for use with different types of glasses and headsets that could be deployed across several platforms.
Qualcomm's moves in the metaverse could help it add another dimension to its already prolific growth. The company recorded a 30% year-over-year revenue increase, to $10.7 billion, and a 49% earnings per share rise, to $3.23, in the first quarter of fiscal 2022 (ended on Dec. 26, 2021). Analysts are expecting 15% annual earnings growth from Qualcomm over the next five years although the company could do better once catalysts such as the metaverse kick in.
All of this makes Qualcomm an enticing tech stock to buy right now as it is trading at just 16 times trailing earnings, which is substantially cheaper than the Nasdaq-100's multiple of 33.
