The metaverse offers added opportunities for a variety of tech stocks. Grand View Research estimated a market size of $47 billion for the metaverse in 2022. It believes that the market will grow to $679 billion by 2030, a compound annual growth rate of 39%!
The question for investors is: Which stocks will help them best capitalize on this high-growth market? While numerous stocks may rise because of the metaverse, investors may want to look closely at Advanced Micro Devices (AMD 0.09%), Qualcomm (QCOM -0.26%), and Shopify (SHOP -1.16%). Let's take a closer look at these three top metaverse stocks and why now might be a good time to buy in on their potential.
1. Advanced Micro Devices
AMD is a leading designer of CPUs and GPUs, focusing on the video gaming and data center sectors. Moreover, the recent acquisition of Xilinx boosted AMD's supercomputing capabilities and added an radio frequency identity (RFID) chip to its portfolio. Such offerings drew the attention of Meta Platforms, and the Facebook parent announced last year that AMD's EPYC processors would help run its data centers.
Furthermore, AMD continues to grab market share from longtime rival Intel. It now claims a record 28% market share in the processor market, according to Mercury Research. Additionally, the recent purchase of Pensando should enhance the company's data center and edge computing capabilities.
The company's financials seem to reflect these successes. In the first quarter of 2022 (ended March 26), AMD's revenue of $5.9 billion increased 71% versus year-ago levels. Also, the $1.6 billion in non-GAAP net income the company earned during the quarter surged 42% compared with the same quarter last year. Higher operating expenses and a $293 million amortization charge on acquisition-related intangible assets weighed on profitability.
Also, even with the declines in recent months, AMD's stock price has risen by 35% over the last year. That increase has taken its P/E ratio to 40, well under the 53 earnings multiple of rival Nvidia, making it an excellent option for investors who want to invest in this part of the metaverse but consider Nvidia too expensive.
The communications chip company is diversifying outside of smartphone chipsets, and one area of interest is the metaverse. Moreover, much like AMD, it has partnered with Meta Platforms.
However, it participates more in the forefront as it provides the semiconductors for the Oculus VR goggles. Additionally, it has collaborated with Microsoft. Qualcomm will power the company's AR glasses and Microsoft Mesh, which supports holographic images in a virtual setting.
More importantly for investors, Qualcomm offers what looks like an underappreciated opportunity. In the first six months of fiscal 2022 (which ended March 27), revenue of $21.9 billion rose 35% versus the first six months of fiscal 2021. Net income increased even faster during the period, rising 50% to more than $6.3 billion as the company limited cost and expense growth to 22%.
Despite that growth, the stock is only up modestly on the year. Still, the P/E ratio has fallen to just 14, lower than every major chip stock except Intel. Given the low multiple and the rapid earnings growth, investors might want to buy this metaverse stock while it is cheap.
Investors probably know Shopify best for e-commerce sites, a business without an obvious connection to the metaverse. Nonetheless, Shopify has made it possible for its merchants to display AR and 3D versions of their products on Shopify's platform. Moreover, it consolidates these visuals onto a single app called ARitize3D, an improvement over previous versions that required multiple apps to view.
Additionally, Shopify offers investors other reasons to buy now and hold forever. It provides services such as inventory management for both offline and offline retail, payment processing, and cross-border commerce. However, it seems to have transcended its identity as a software company by establishing the Shopify Fulfillment Network (SFN). The SFN processes, packages, and ships orders, a service not offered by its software-oriented competitors.
These services helped Shopify generate $1.2 billion in revenue in the first quarter of 2022, rising 22% year over year. Rapid increases in expenses and increasing income taxes took adjusted net income to $25 million, down from $254 million in the year-ago quarter.
But despite these profit struggles, the company expects conditions to improve by the fourth quarter. Furthermore, a 70% drop in the stock price over the last year could more than compensate investors for such struggles. Its P/S ratio of around 10 is at its lowest level in six years. As Shopify drives e-commerce growth inside and outside the metaverse, the stock should eventually resume its move higher.