Investors are increasingly interested in the metaverse, looking for stocks that can capitalize on this upcoming technology growth. The metaverse is widely considered as the next generation of the internet, where people would interact for business, socializing and gaming in online virtual worlds that resemble real life.

Metaverse market could soon explode

According to Bloomberg, the global metaverse revenue opportunity could approach $800 billion by 2024. This figure incorporates projected revenues from virtual (VR) and augmented reality (AR) hardware, live entertainment opportunities and advertising revenues. Looking ahead, the metaverse could also translate into a digital economy where users can create, sell and buy various products.

Like any other sector, there will be winners and losers in the metaverse ‘race’. Some stocks present limited metaverse exposure and huge market capitalizations, while others are relatively young bearing higher risks. Therefore, investors should primarily consider their risk tolerance when seeking metaverse exposure, bearing in mind that unfavorable economic conditions might trouble growth stocks’ valuations in the medium-term.

Roblox: the new era of play

Roblox is an online interactive gaming platform and development system, which allows users to program and play games for free. It is already considered as a go-to virtual world, and with almost 50 million daily active users it is considered to have a significant head start on what could be an early-stage version of the metaverse.

The company’s valuation still poses serious risks. Despite its consistently increasing revenue base, it has yet to record bottom line profits. Moreover, the current macroeconomic conditions are highly unfavorable for unprofitable growth stocks such as Roblox.

Omniverse: Nvidia’s ‘metaverse for engineers’

The companies creating the next generation of the internet will require increasing numbers of high-performance hardware and software products. On the hardware side, Nvidia is set to benefit from growing GPU demand, while on the software side, the company can benefit through its Omniverse Enterprise which could become the place where companies go to design and create virtual worlds.

Nevertheless, Nvidia’s stock is currently trading at a hefty forward price to earnings ratio of 42, which denotes the dollar amount someone would need to invest to receive back one dollar in annual earnings. However, with so many ways to ride the metaverse tailwinds, Nvidia’s shares are definitely worth looking at.

Meta: bargain stock or value trap?

Meta Platforms is responsible for introducing the technology into the ears of every investor. The company is currently investing heavily into developing the metaverse, both from a software and hardware perspective. Its Oculus VR headsets have already made the company into an early leader of the VR market.

Meta seems like a bargain stock considering its recent price depreciation of over 40% and its forward price to earnings ratio of 16.5. However, the slowing growth in its core advertising business together with the billions of dollars required to develop the metaverse raise the question on whether the stock is a bargain or a value trap.

Interactive entertainment: Microsoft’s next big bet

Microsoft has recently utilized its financial firepower to acquire Activision Blizzard, in an attempt to become one of the biggest creators of interactive entertainment. The move highlights Microsoft’s view that the path towards the metaverse runs through the video game industry. Moreover, the company’s mixed reality overlay service, Mesh for Microsoft Teams, seeks to change the way virtual meetings are currently held through utilizing AR and VR technologies.

Microsoft’s strong balance sheet and immense growth prospects, together with its track record of diverse revenue streams make its stock a safe candidate with more limited metaverse exposure. Taking a technical look at Microsoft shares, if the recent rebound extends, the first line of resistance might be the 305.1 hurdle. On the contrary, if selling pressures resurface, support might then be first found at the 280.0 obstacle.