Contrary to popular belief, the metaverse is not a new notion. The term was coined by bestselling author Neil Stephenson in his science fiction novel Snow Crash all the way back in 1992. That said, there's no doubt that the concept has been generating more headlines of late as a host of businesses race to cash in on this idea of a persistent 3D virtual world backed by technologies including virtual reality (VR), augmented reality (AR), artificial intelligence (AI), and blockchain.

Generally speaking, investors tend to view metaverse-centric companies such as Roblox and Unity Software as riskier investments, but there are some exceptions. Let's have a look at two safer stocks that offer investors a great chance to profit from the creation of the metaverse. And by safe, I mean these companies are already strongly profitable and cash-flow positive, but still have tremendous upside potential in the metaverse arena.

A person looking through virtual reality headset with metaverse technology background.

Image source: Getty Images.

1. Nvidia 

Nvidia's (NVDA -1.81%) graphics processing units (GPUs) and system-on-a-chip products are widely relied upon for gaming and 3D simulation, cryptocurrency mining, and the development of other business applications, many of which will be foundational to the metaverse. Likewise, its on-the-rise NVIDIA Omniverse platform has a chance to revolutionize the world as we know it. In essence, Omniverse is a platform designed for 3D real-time simulation and design collaboration. For example, BMW Group has used the platform to design a future car factory, creating and simulating an exact "digital twin" of the facility. Between Nvidia's hardware and its Omniverse platform, it's one of the companies with the most potential upside in the metaverse.

In its fiscal 2023 first quarter, which ended May 1, Nvidia's total sales soared 46.4% year over year to $8.3 billion, and its adjusted earnings per share increased 49.5% to $1.36. On the profitability front, its adjusted gross and operating margins expanded by 90 and 255 basis points, respectively, to 67.1% and 47.7%. During the quarter, the tech giant also generated $1.4 billion in free cash flow, bringing its total over the past 12 months to $7.9 billion. As of the end of the quarter, Nvidia had $20.3 billion in cash and marketable securities on the books. For the year, Wall Street analysts expect the company's revenues and earnings to climb by 23.9% and 20.3%, respectively, to $33.3 billion and $5.34 per share.

Those are rock-solid growth rates, and given that its shares have plunged by 36% since the start of 2022 and its current price-to-earnings ratio of 50.9 is well below its 5-year average of 59.0, Nvidia appears to be a smart investment today. 

2. Meta Platforms

As evidenced by its name change from Facebook to Meta Platforms (META 2.44%), this company is fully committed to its metaverse transformation. The social media giant's Reality Labs business segment is focused on developing VR and AR hardware and software, such as its Oculus Quest 2 headset, in addition to other metaverse platforms like Horizon Worlds. In the second quarter, Meta's research and development spending rose by 42.6% year over year to $8.7 billion as it continued to ramp up its investments in the space. Meanwhile, Reality Labs booked a $2.8 billion operating loss, wider than its $2.4 billion loss in the same quarter a year ago.

It will take time for the company's metaverse plans to come to fruition, but investors shouldn't fret. The social media king has $40.5 billion in cash and marketable securities on the books, and has generated $35.8 billion in free cash flow over the past year. And its revenue from advertising -- the backbone of its business -- totaled $28.2 billion in the quarter, equal to 98% of total sales.

In short, Meta is well-funded to further its metaverse ambitions, all while enjoying a steady stream of income from its world-class ad business via its Facebook platform. Today, the Facebook platform boasts 2.9 billion monthly active users, equal to more than one-third of the global population. And similar to Nvidia, Meta has had a rough year in the stock market up to this point. Its shares have fallen by about 50% since the beginning of 2022. That has dragged its price-to-earnings ratio down to an all-time low of 13.6, well below its five-year average of 27.9.