Some investors could have a case of the "metaverse mehs." There was a lot of buzz initially about a virtual universe that could generate trillions of dollars in annual revenue. But after the hype wore off, many once high-flying stocks with metaverse connections lost their luster.
However, the long-term potential for the metaverse remains as great as ever. And many of the companies that are best positioned to succeed in the future have other businesses that are already lucrative. Their stocks give investors a way to profit on the metaverse without betting the farm on it. Here are five unstoppable metaverse stocks to buy in 2023 (listed in alphabetical order).
1. Amazon
Amazon (AMZN 3.43%) probably isn't the first stock that comes to mind when you think about the metaverse. However, the company could nonetheless profit tremendously from it. The metaverse will almost certainly operate in the cloud -- and Amazon Web Services (AWS) ranks as the largest cloud-hosting provider in the world.
Metaverse or not, AWS stands out as one of the top reasons to buy Amazon stock in 2023. The cloud-hosting unit continues to grow robustly. One analyst even thinks that AWS is on track to be worth $3 trillion down the road. Amazon as a whole is valued at around $870 billion right now.
Amazon stock is currently down close to 50% below its previous high. This steep decline is largely the result of macroeconomic headwinds and the company's higher spending. The former issue should only be temporary, while Amazon is already taking steps to address the latter. If you're looking for a surefire winner in the next bull market, I think Amazon is a top contender.
2. Apple
Apple (AAPL -0.35%) stands out as another company that isn't as closely identified with the metaverse as some other tech giants. However, that could soon change. Apple reportedly plans to launch a mixed-reality headset, potentially as soon as 2023. Analyst Ming-Chi Kuo, who closely follows the company, predicts that the new device will be "a game-changer for the headset industry." It could also signal a strong opening salvo for Apple's entrance into the metaverse race.
However, Apple doesn't need the metaverse to be successful. The company's iPhone-centered ecosystem continues to generate several hundred billion dollars in sales each year. Augmented reality and 5G adoption should be key drivers of this revenue growth regardless of whether or not the metaverse achieves its potential.
Apple also has other growth drivers. Advertising could become the company's next $10 billion business sooner than expected. Apple also has a major opportunity in the fintech market with Apple Pay. With the stock down close to 30%, buying Apple in the new year could pay off nicely when the inevitable market rebound comes.
3. Meta Platforms
No company has tied its fortunes to the metaverse in a more high-profile way than Meta Platforms (META 0.43%). Once known as Facebook, Meta arguably has the grandest vision of what the metaverse could become. It's investing billions of dollars in building hardware and software to make the metaverse dream a reality.
But while the metaverse could be Meta's future, its social media empire pays the bills for now. Many investors are concerned that Facebook and Instagram are losing their appeal. However, Meta still raked in $27.7 billion in revenue in the third quarter of 2022 with $4.4 billion in profits. The number of daily active users on its social platforms increased both year over year and sequentially to 2.93 billion.
NYU professor Aswath Damodaran believes that there's pretty much all upside for Meta based on its valuation. When one of the most influential valuation experts in the world says that, it deserves attention. I'm not sure if Meta stock will necessarily be a big winner in 2023. Buying the stock in the new year, though, could pay off in a huge way over the long run.
4. Microsoft
Microsoft (MSFT 1.82%) is already partnering with Meta to bring its Teams collaboration software into the metaverse. The company is already a major player in gaming with Xbox. And if its pending acquisition of Activision Blizzard isn't blocked by regulators, Microsoft could become an even bigger force in the metaverse.
Like several others on this list, though, Microsoft's fortunes don't hinge on the metaverse. The company is the 800-pound gorilla in multiple massive markets, including operating systems and office productivity software.
Why buy Microsoft in 2023? For one thing, it's available at a discount with shares down nearly 30% year to date. Microsoft also has several avenues to jump-start its growth, including its Azure cloud-hosting unit and the move into digital advertising.
5. Nvidia
I'd put Nvidia (NVDA 6.18%) near the top of the list of clear winners if the metaverse takes off as much as some think it will. The company's graphics processing units (GPUs) are the gold standard in running gaming apps. That advantage will likely carry over into the metaverse world.
However, Nvidia's opportunities extend far beyond gaming. In the third quarter of 2022, nearly 65% of the company's total revenue of $5.93 billion came from its data center segment. Professional visualization (which includes Nvidia's Omniverse metaverse platform) and automotive and embedded systems businesses contributed a little over $500 million of the total as well.
Sure, Nvidia has taken a beating this year. The stock is still down nearly 50% year to date even after rising quite a bit in recent months. But Nvidia plans to launch its new Grace CPU Superchip in 2023. Its data center and automotive units should continue to perform well in the new year. If the gaming market begins to recover in 2023, look for Nvidia stock to soar.
