The metaverse: A new reality beckons for emerging market equities
The metaverse arguably entered the mainstream when Facebook renamed itself Meta in October last year and the volume of worldwide Google searches for the term exploded. In January this year, Microsoft added to the excitement by announcing the $75 billion acquisition of games developer Activision Blizzard. And in May, Google acquired Raxium, a start-up whose MicroLED display technologies could enable better virtual reality headsets.
Perspectives on what the metaverse actually means vary, but it could be summarized as a variety of digital platforms, experiences and services that may converge into an integrated, interconnected whole.
However you choose to define the metaverse, though, it is clear that Big Tech is making big bets on the sector. Why? Because socializing, gaming, browsing, buying, travelling and a wide spectrum of other human activities are becoming digitized in new and increasingly immersive and interactive ways.
So in the same way that online streaming killed CD and DVD sales, and e-commerce continues to erode market share for physical stores, the metaverse could take the digital disruption of existing business models to a new level. Not surprisingly, then, analysts and investors are keeping a close watch on the opportunities this disruption may create.
“An $8.3 trillion opportunity” is how Morgan Stanley describes the process of moving just advertising and e-commerce transactions into the metaverse, in the US alone. Extending that migration to other areas of consumption, such as games, autos or real estate, could imply “another $5 trillion in consumer spending,” according to the investment bank.
Building the kind of immersive experiences that underpin the metaverse is also going to take considerable hardware and software. That means potential growth and revenue for semiconductor firms, device makers and innovative software developers globally.
A whole ecosystem of industries could benefit from metaverse adoption, including names in entertainment, payments, video games, cloud computing, telecom and network infrastructure, augmented and virtual reality (hardware and software), PCs and smartphones. Blockchain and cryptocurrency firms will also be key supporters, as they create infrastructure for a new generation of ‘interoperable’ platforms that allows for digital assets to move between them. And all that is before next-generation technologies like artificial intelligence or remote medical care are incorporated into market forecasts.
These virtual environments, where social and economic elements converge to replicate reality, generate a lot of media headlines but tech analysts expect building out the platforms and drawing in a critical mass of users could take a decade or more. In that time, significant experimentation from established companies and new ventures from potentially market-leading names that don’t even exist yet will likely change the commercial landscape of the metaverse.
So investors interested in this emerging domain have time to do their research, but the implications of the metaverse are transformative: companies that offer compelling immersive experiences to consumers are not likely to stay under the radar for long.
In terms of investment, Bloomberg Intelligence has studied how retail investors can already leverage the metaverse theme through related exchange-traded funds, which it estimates could “balloon to $80 billion in assets under management by 2024.” ETFs are only one way for investors to access what Bloomberg estimates to be a US$800 billion market for digital worlds by 2024.
The leapfrog effect, where consumers in less developed markets get ahead of developed ones because they can bypass legacy systems and entrenched stakeholders, is another metaverse dynamic to watch. Markets such as China and India could emerge as leaders in the adoption of this form of extended reality.
A World Economic Forum survey, conducted by Ipsos, finds more positive sentiment about engaging with the metaverse in daily life in China and India, as well as South Korea, than it does in Japan, the UK or the US. Large, and largely growing, consumer markets in Asia could prove pivotal in metaverse development, both from the standpoint of critical mass supporting digital worlds and the products or services accessible in them.
Digital disruption has already opened a playbook for investors. Shares in online retailer Amazon have grown over 100,000% since 1997, even with the recent drop in equity markets. A similar story could be about to roll out with the metaverse and, while risks are equally present, long-term equity shareholders may have a distinct advantage; they can leverage existing holdings to access liquidity and invest in a range of new ventures.
In a rapidly digitizing world, securities-based financing can be a quick and straightforward source of capital for entrepreneurs looking to invest in virtual worlds or extended consumer engagement, either through taking new equity positions or financing their own metaverse interests, such as buying digital land for their business on a popular platform. The metaverse may be a new frontier, but the importance of this fast, flexible and dependable source of capital will not change.
Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1780/2022) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.