Metaverse Has Yet to Catch on With Investors

Many analysts see the next big thing in technology as the building of the metaverse, a digital world where users can socialize, play games, and conduct business.  However, investors are not yet convinced of the viability or profitability of the concept. 

Citigroup says that investing early in the opportunities of the metaverse is viable and that the industry's size will grow to $8-$13 trillion by 2030.  Facebook changed its name to Meta Platforms in October and today changed its stock symbol to META from FB.  Meta Platform’s (META) stock price has plummeted by almost half from its 2021 all-time high.

Skepticism remains high on the money-making opportunities of the metaverse.  The Roundhill Ball Metaverse ETF (METV), the biggest of the seven U.S. exchange-traded funds that aim to capitalize on the metaverse, has tumbled by 39% in the past year.  The risk is that the promise of the new metaverse turns out to be overblown hype that costs investors billions.  Morningstar Investment Service says it is still unclear whether social media users will shift to the new technology and, if they do, how soon will advertisers follow.

Meta Platforms CEO and Co-founder Zuckerberg dove headfirst into the idea of building a metaverse last year.  That shift also added fuel to companies that were expected to benefit from the metaverse, such as Nvidia (NVDA) and Roblox (RBLX), which both more than doubled last year.  However, the subsequent bear market in technology stocks has seen investors exit the most speculative stocks, including metaverse plays, for safer alternatives.

There are still no profitable large-scale business models for a metaverse-focused company.  Nvidia and Roblox have slumped 44% and 76%, respectively, from their peaks.  However, Citigroup advises investors to stick with the companies that provide the pipes and gear to make the metaverse possible, such as T-Mobile (TMUS) and Qualcomm (QCOM).  Global X says to play for the long-term as metaverse adoption in key segments of the economy such as education, health care, manufacturing, communications, and entertainment will be transformative.