Several tech giants are betting that the metaverse could turn out to be the next hot trend in technology.
The metaverse is widely believed to be the next evolution of the internet, allowing people to experience the internet in 3D. Not surprisingly, the metaverse is expected to touch several sectors ranging from online education to gaming to social interactions to commerce.
This explains why Goldman Sachs sees the metaverse generating an $8 trillion revenue opportunity in the long run for its participants. Amazon (AMZN -2.25%) and Nvidia (NVDA 3.92%) are two tech giants that could win big from this massive opportunity. Let's see how.
1. Amazon
The e-commerce market is expected to be one of the key beneficiaries of the metaverse. TechNavio estimates that metaverse in the e-commerce market could grow at an annual pace of 36% through 2026, adding $60 billion in incremental revenue during the forecast period. North America is expected to occupy a 38% share of the metaverse-powered e-commerce market by 2026.
The proliferation of the metaverse in e-commerce could add another dimension to Amazon's growth given the company's position in the North American and global e-commerce markets. For instance, Amazon captured 56% of the U.S. e-commerce market in 2021. Its global share stood at 13% back in 2020.
Amazon has been setting itself up to take advantage of this opportunity even before the metaverse became a thing. In 2017, the e-commerce and cloud computing giant launched an augmented reality (AR)-enabled iOS app called AR View. The app allowed consumers to visualize how items such as furniture would look in a room. The company updated that app in 2020 and gave consumers the power to place multiple items in a room with the Room Decorator tool.
This year, the company gave its AR tool another upgrade with the launch of Amazon View. Consumers can now get a 3D layout of their house on their smartphones and customize it with accurate measurements of the furniture items they may want to purchase. Also, customers looking for interior design inspiration can get a quick assessment with the help of Amazon View.
Of course, this technology has been around for some time, but Amazon's focus on refining it and its solid share of the e-commerce market position the company in a nice position to take advantage of the metaverse. This, however, is just one way in which Amazon is on track to win in the metaverse.
The cloud computing market could be another beneficiary of metaverse adoption. That's because hosting the 3D virtual worlds that will form the base of the metaverse will require a lot of computing power so that multiple users can be served in real time. Other cloud services, such as analytics, machine learning, and storage should also see a bump in demand.
With Amazon controlling 34% of the cloud infrastructure market in the second quarter of 2022 and occupying a bigger share than the next two providers combined, the demand for its cloud services should ideally boom as metaverse adoption gains momentum.
All this indicates that Amazon could turn out to be a top metaverse pick in the long run, with the emerging tech trend complementing the solid growth it is witnessing in other niches. As such, don't be surprised to see Amazon's earnings grow at a faster rate in the next five years as compared to analysts' estimate of 33% annual growth.
2. Nvidia
Nvidia's expertise in graphics cards positions it to tap into the metaverse opportunity. The company started taking advantage of this opening with its Omniverse platform, supporting 3D designs, virtual avatars, and digital twins, which are 3D virtual representations of physical objects in the real world.
On its August earnings conference call, Nvidia CFO Colette Kress pointed out that the chipmaker has "announced advancements to several foundational technologies of the metaverse, defined as the 3D version of the Internet." The company's "Omniverse Avatar Cloud Engine will enable businesses to create and deploy assistants and avatars, transforming interactions across a range of industries."
Nvidia has also released solutions that will "help automate the creation of virtual worlds" with the help of artificial intelligence and graphics cards. It is worth noting that Nvidia's metaverse-specific solutions are already gaining traction among customers. Siemens and Nvidia announced a partnership in June 2022 to accelerate the adoption of digital twins in the industrial niche. PepsiCo is another company that tapped Nvidia's Omniverse digital twins to improve the efficiency of its operations.
Partnerships like these put Nvidia on track to benefit from a fast-growing opportunity. The demand for digital twins is increasing rapidly as they help deliver productivity and process improvements and play an important role in the industrial Internet of Things. Mordor Intelligence estimates the digital twin market could clock 34% annual growth through 2027.
Nvidia's Omniverse ecosystem continues to expand with the addition of third-party developers in various industries such as robotics, 3D designs, and industrial automation. It won't be surprising to see the company become a major player in this rapidly growing market.
On the other hand, Nvidia's graphics cards are also powering supercomputers that are supposed to enable the metaverse. So, the semiconductor giant is on its way to taking advantage of both the hardware and the software side of the metaverse. The massive opportunity present in this market means that it could become a monster metaverse play in the long run.
