There's no doubt about it, the rise of artificial intelligence (AI) stole the spotlight from the metaverse on Wall Street. But it would be a mistake to think of these two trends as being mutually exclusive.
Some companies with the potential to score explosive wins in AI are also betting big on the future of the metaverse. If you're an investor seeking promising opportunities at the intersection of these influential trends, read on to see why Roblox (RBLX 1.35%) stands out as a top play.
Roblox has a fantastic growth engine
Before diving into Roblox's opportunities in AI, it's helpful to understand the metaverse leader's core service offering and take a look at its recent business performance.
Instead of being a simple video game, Roblox is a platform that hosts thousands of different experiences. Notably, these games and social hubs are actually created by users of the platform -- and creators can earn real-world money if their content winds up being a hit with other users.
In the third quarter, developers on the platform earned approximately $170.7 million for their content. Meanwhile, they earned $590 million over the first three quarters of the company's last fiscal year -- good for annual growth of 33.5%.
Due to the incentive structure that Roblox has put in place, new content is continually being added to its metaverse. This dynamic helps attract new users and promote engagement among those who are already enmeshed in its virtual world.
Thanks to the strong and expanding breadth of content on the platform, Roblox's average daily active users grew 20% year over year to reach 70.2 million in the third quarter. Rising engagement helped push sales up 38% year over year to reach $713.2 million in the period.
The business's recent performance has been very encouraging, and it looks even better given that Roblox has just started to capitalize on some AI-related opportunities.
Don't overlook Roblox as an AI stock
The market seems to be broadly underappreciating Roblox's opportunities in AI. For starters, the company is in the early stages of building and rolling out its digital advertising platform.
Roblox already has a large and highly engaged user base, and total engagement hours on its platform rose 20% year over year to hit 16 billion in the third quarter. The implementation of digital ads and AI-based targeting has the potential to create major new revenue streams.
The company has also just started to roll out generative AI tools for creators and other users. With its new tools, creators can already use AI to create virtual objects and streamline coding for their games and experiences. But there's a very good chance that AI will become an even bigger part of the Roblox platform.
Services, including ChatGPT and Dall-E, have already become popular for creating text and visuals, and it's likely that generative AI will also make waves when it comes to the creation of interactive 3D objects and experiences. Roblox is in good position to be an influential player in potentially explosive new generative AI categories, and its opportunities in the space remain severely underestimated.
Roblox stock could be a huge long-term winner
After stagnating at the end of 2022, Roblox's business is back to posting explosive growth. Notably, the company has returned to posting much stronger sales momentum even though some potentially massive growth drivers are just starting to be revved up.
The metaverse leader is still in the early stages of tapping into a potentially massive digital-advertising opportunity, and the company's generative AI opportunities are being overlooked. Still down 69% from its high, Roblox stock is a smart buy for investors seeking potentially explosive growth plays.
