The applications have evolved from an entertainment platform for gamers to a tool to enhance experiences, engagements, education and workplace productivity. It's continuing to grow its end-user population as more applications become available.
This article will look from an investing perspective to understand considerations for virtual reality investment. By the time you finish this article, you will have a good grasp on investing in virtual reality.
What is Virtual Reality?
Despite being around for over three decades, virtual reality is still an emerging technology. It immerses the user in a simulated three-dimensional environment through a headset device and hand controllers. It incorporates visual, sound and touch feedback (3D) to give the user a sense of immersion in a simulated digital environment.
The experience makes the user feel like they are in a specific world, engaging in situations at different locations and terrain for entertainment, education or work purposes. Virtual reality is making waves with live events like concerts. It attempts to stimulate the senses, bolster motivation, enhance learning and amplify productivity when used for teaching and training.
How Does Virtual Reality Work?
Virtual reality technology utilizes both hardware and software to work. It requires both hardware and software to function. Hardware requires the end-user to wear a headset that provides a 360-degree view of the virtual environment.
Hand controllers or gloves are used for touch feedback so the user can navigate and interact with the environment. Sensors and computer screens within the headset and hand devices are critical components for the cumulative effect of being accessible and unbound in a reactive environment. Powerful computer chips and graphic chips operate all this to work seamlessly. The hardware will eventually get smaller.
You can use virtual reality in numerous fields and applications. Medical students, pilots and mechanics (and other careers) can use virtual reality for training. Kids can also learn more excitingly and engagingly by utilizing the technology. Virtual reality can place you in live concerts or the cockpit of a Formula 1 racing car. The metaverse makes virtual shopping, working, entertaining and engaging in communities work. It even lets people acquire virtual properties and homes to entertain virtual friends and associates. The possibilities are endless.
3 Ways to Invest in Virtual Reality (Besides Gaming)
Virtual reality may seem like much pretending, but it is a serious business. Aside from video game stocks to invest in, the real growth lies in how virtual reality flourishes with a mainstream audience. Virtual reality is moving away from video games into the workplace.
Grandview Research shows the industry should grow to $87 billion by 2030. If virtual reality has piqued your mind, then you are probably wondering how to invest in virtual reality companies and profit from the technology. Rather than investing in a company that solely does virtual reality, it's more prudent to consider companies that cover multiple aspects of virtual reality besides complementary services and products.
Virtual reality requires both hardware and software to operate. An internet connection and mobility enhance the experience, especially when connected to the metaverse. The hardware segment would include companies that make semiconductors, displays, sensors, servers, virtual reality headsets, speakers, controllers and gloves. This can include many different computer and technology stocks.
The software segment would include companies that make video games, applications and metaverse providers and platforms. Investing in artificial intelligence companies is a secondary way to invest in VR. eSports continues gaining popularity and moving towards using virtual reality for gamers and viewers, so it is logical to consider investing in esports companies.
The metaverse describes virtual worlds that combine online communities, social networks, games, commerce and virtual reality environments. They are virtual ecosystems that exist digitally online rather than physically on land. It can be a hard notion for Baby Boomers (born from 1946 to 1964) and Gen-X-ers (born from 1965 to 1980) to grasp, who are used to the analog era of conducting business in a physical bank branch, working in a physical office, speaking to people on a wired landline phone with a dial tone or even using a pay phone and a pager. Millennials (born between 1981 to 1996) are acclimated to using smartphones and mobile apps, connecting on social media, digital banking and remote work.
Gen-Z (born from 1997 to 2012) and Gen-Alpha (born from 2010 to 2024) was born into the digital era as the first generation of digital nomads using tablets, smartwatches and the cloud. The digital transformation of business and personal day-to-day lives, combined with the migration to the cloud, will continue to draw people, especially younger ones, to the metaverse. Virtual reality is a cornerstone to being immersed in the metaverse. People want to learn how to invest in virtual reality stocks.
Broadband connectivity is critical for connecting to the metaverse, so you can consider 5G companies that provide services to broadband providers, cloud computing companies, internet service providers (ISP), wireless chipsets and modem makers.
How to Invest in Virtual Reality
As you become more interested in virtual reality investment, you must have a game plan. First and foremost, it pays to know about investing in technology stocks. Finding virtual reality companies to invest in will take some legwork, but preparation is vital.
Step 1: Research the technology behind virtual reality.
Get up to date on virtual reality technology. Brief yourself on the industry's state by reading articles and research reports. You can use keywords like "virtual reality" in search engines and the news. Familiarize yourself with the applications for virtual reality and identify the various components that make the technology possible.
Step 2: Find viable stock candidates.
Finding virtual reality companies to invest in can be tricky because there are rarely any major pure-play companies. The significant players in virtual reality technology may have core businesses in other segments of the technology sector. Since they have deep pockets, they can target the capital and resources to enhance their footprint in the virtual reality segment. Instead, some companies specialize in various virtual reality components and serve a broader base of applications and customers. Virtual reality is often an add-on service for many technology companies.
Step 3: Research stocks.
Fundamental and technical analysis is required. It pays to read the company's latest quarter report, gauge its performance against analyst estimates and forward guidance for fundamental research. Read its recent press releases and try to compile a list of catalysts that could send shares higher. Put together a checklist of the pros and cons of the underlying business.
For example, pros could include:
- Rising year-over-year (YoY) revenues and earnings
- Raised forward guidance
- An upcoming launch of a new product cycle
Cons could include the opposite:
- Declining YoY revenues and profits
- Lowered guidance
- Lack of new products
- Growing inventory levels
For the technical analyst, consider using candlestick charts and indicators like moving averages to determine the stock's trend. Is it uptrending or downtrending? Identify the support price levels the stock has consistently bounced off on pullbacks. Identify price resistance levels where the stock peaks and sells off from. These can eventually be your entry and exit price levels. Determine secondary support and resistance levels as well. These can act as stop-loss and profit targets for your position.
Step 4: Invest in the stock(s).
Once you've completed the selections and research process on your stock candidates, you are ready to take the plunge and invest. Of course, you need to have a brokerage account, and it helps to have $0 commissions, which most online brokers offer.
Do your preparation for the trades. You can purchase and sell in single trades for the total position, scale into and out of the position or combine both. Ensure you have an entry price range based on your technical analysts finding support levels. Additionally, have a stop-loss price level and target price levels. The more important thing is to have a plan of action and the discipline to exit the position and nullify the risk if a stop-loss or profit-price target is achieved.
Combining Next-Gen Technologies
Next-generation technologies often converge and compound for a more substantial cumulative effect. This applies to virtual reality and other next-gen technologies that can improve and enhance the experience. AI, the Internet of Things (IoT), 5G wireless and edge computing can all intersect to improve the virtual technology experience. Therefore, it pays to look for companies with several of these next-gen technologies under their roof, especially vertically integrated technology companies.
Can Virtual Reality Be Mainstream?
Virtual reality seems ambitious. What may seem far-fetched now can be a reality in the future. With further technological advancements, virtual reality can be mainstream, but the Gen-Z and Gen-Alpha digitally inclined demographic can make it mainstream. It can become more mainstream as the younger generations migrate toward the technology and onboarding becomes cheaper and more convenient. One of the hindering aspects in the past has been hardware technology. Headsets were too large and clunky, anchored by wire to a computer-limited movement.
As technology continues to improve, the headsets will get more compact and easier to use, and they won't be anchored or tethered to a computer. Hand controllers and gloves may also become irrelevant as hand gestures, voice and eye movements can interact with the environment effectively. As headsets get smaller and lighter, they will appeal to more consumers. As prices drop, it opens the gateway for more adoption by a wider consumer demographic.
Here are some common frequently asked questions about how to invest in VR.
Can you invest in virtual reality?
You can invest in companies that make virtual reality technology possible and enhance the experience. It helps to segment your search into several components, as virtual reality is an emerging segment for large technology companies, including hardware and software applications.
What company is leading in virtual reality?
Some leaders in virtual reality include companies that make both the hardware, like virtual reality headsets and the applications, like the metaverse. One of the most prominent players in virtual reality is Meta Platforms Inc. (NASDAQ: META), which spends billions annually building out the technology and platforms.
Is there an ETF for virtual reality?
Many ETFs invest in technology stocks that serve a role in the virtual reality space. If you want to leave the research to the professionals but still want to invest in virtual reality, then you can consider an exchange-traded fund (ETF). These are operated by professional fund managers who are experts in the industry. The virtual reality ETFs focus on the different investment segments in virtual reality. There are metaverse ETFs that invest in companies associated with building out or operating in the metaverse.