Virtual reality (VR) is by no means a new technology, showing up in various devices over the last three decades. However, technological advances have only recently made it possible for companies to deliver the VR experience that was promised many years ago. As a result, the market has massive growth potential, with Fortune Business Insights projecting the industry to expand at a compound annual growth rate of 45% through 2029 and hit $227 billion.
While the VR market is still in its early days, it's not a bad idea to consider adding a VR stock to your portfolio. The companies pushing the industry forward will be well positioned to profit substantially from its development, as will their investors.
So, without further ado, here are two stocks to invest in virtual reality this month.
1. Nvidia
Nvidia (NVDA -1.02%) has inadvertently been powering various VR headsets for years. The company's consumer line of computer components is exceedingly popular within the gaming community, with its graphics processing units (GPUs) running custom-built gaming PCs worldwide.
Many headsets on the market can be made more powerful when connected to a console or PC, utilizing the power of the machine's GPU. And the more powerful the GPU, the better the VR experience. Meanwhile, Nvidia is one of the few companies producing chips capable of running intensive VR workloads.
One of the most popular VR devices to date is Meta's Quest line of headsets. The most powerful version is the Meta Quest Pro, which is currently run on a Snapdragon XR2 Plus Gen 1 chip, the equivalent of a chip used in high-end smartphones in 2020. As a result, it's essentially a three-year-old smartphone chip being asked to run demanding VR tasks. While this has worked for Meta thus far, more powerful chips will be required to take its headsets to the next level, and that's where Nvidia could come in.
Nvidia already has a business developing custom systems on a chip (SoCs) for different tech companies, with one of its most high-profile clients being Nintendo, which uses Nvidia's hardware in its Switch console. In other words, Nvidia is well equipped to provide its chips to various VR companies and power the next generation of headsets.
Alongside a forward price/earnings-to-growth ratio of 0.2, Nvidia is an attractive way to invest in VR, as the metric suggests its stock is undervalued compared to its projected growth.
2. Apple
Apple (AAPL -2.88%) is one of the biggest names in VR right now, and its first headset hasn't even launched yet. The company unveiled the highly anticipated Vision Pro at its Worldwide Developer Conference on June 5. The headset is capable of switching between virtual and augmented reality (AR), and will be officially released in early 2024 and start at $3,499. The high price tag will likely lock out most consumers. However, the company appears to be playing the long game, and if its history is anything to go by, it will likely dominate the high-growth industry in the years to come.
In the past, Apple has often debuted its first-generation products at high prices and used subsequent updated releases to bring the price down. The company used this strategy with the iPhone, Apple Watch, and iPad. It will likely use this time to create hype for the headset, hone its VR technology, and launch a version for the masses in a few years.
Despite the cost, the Vision Pro appears to have taken leaps in VR innovation. Along with offering AR features, the headset has the same chip as the current MacBook Air, allowing it to function as a full-fledged computer. Whether it's word processing, web browsing, video editing, or video calls, the Vision Pro appears to be up to the task. These capabilities have never really been seen in a VR headset before.
Moreover, the Vision Pro will have a massive advantage as an Apple device. It comes equipped with all of the popular software that MacBook and iPhone users have come to love, from FaceTime to Messenger and more. At the right price, Apple's operating system could be a major driver for the company's growth potential in the market and could convince more consumers to adopt VR in their daily lives.
Buying Apple stock for its VR prospects will be a long-term investment. However, it could also be an early investment in the future leader of the industry.
