Investing in the metaverse: First infrastructure, then content
Updated
With Facebook’s transition into Meta, first announced last October, the metaverse swiftly became a much-hyped topic.
Far from being a new concept, the term “metaverse” was first coined in 1992 by sci-fi writer Neal Stephenson in his novel Snow Crash, where where “humans, as programmable avatars, interact with each other and software agents in a three-dimensional virtual space that uses the metaphor of the real world”.
But since Meta’s presentation at its renaming in October, a host of companies have come forward with metaverse ambitions of their own.
‘First infrastructure and engineering, then application and content’
When investing in the emerging metaverse, it is important to keep an investment timetable in mind.
The Hong Kong-listed CSOP Asset Management’s Metaverse Concept exchange-traded fund (ETF) started trading on Monday. The ETF tracks companies in the following categories: metaverse infrastructure, metaverse engineering, metaverse application and metaverse content.
“In the first stage – say five years – we believe the infrastructure and engineering software side have more growth potential, and these two areas will be allocated with higher weightings,” a spokeswoman for the asset manager said.
“As we move into the second stage where technology bottlenecks are largely solved, we might be seeing more applications and contents flourishing, and taking a larger share of users’ times spent, so more weightings will be allocated to the application and content sides,” she added.
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The ultimate metaverse ‘winner’?
“We are not certain whether Facebook is going to be the ultimate winner in the metaverse because as we know, not only will Facebook already have spent about $10bn (€8.14bn, £7.36bn) last year on metaverse, they need to spend another tens of billions to create it,” said Stephen Yiu, lead manager of £1bn Blue Whale Growth Fund.
Yiu recently sold his fund’s Meta holding in time before the company posted poor results, which sent the share price plummeting. But the selling was not on the back of the fund manager’s distrust in Facebook’s ability to build the metaverse. The fund has an investment objective of positive returns over any given period.
Said Yiu: “We are maybe five to 10 years away from this thing. And at the same time, we have seen increased interest from other tech giants such as Google [GOOGL], Apple [AAPL] and Microsoft [MSFT] to do something in metaverse.
“And the problem is, we don't know at the moment who is going to be the ultimate winner. If we look at the operating system, mobile operating system, there’s only two players: one is Apple iOS, the second one is Google’s Android. We are not going to have like five different metaverses out there 10 years from today, if it materialises. It could be [just those] two.
“We don’t actually know whether Facebook is going to win in this battle. In the meantime, they’re going to spend a lot of money to develop this, hoping that they might win.
“But who is the ultimate winner? Who is the proven winner? In this context, irrespective of who owns the metaverse, it is Nvidia [NVDA]. If 10 years, it is Microsoft and Google, or maybe it’s Apple and Facebook – we don’t care. Nvidia is going to be the heart of this, because everyone is going to need Nvidia graphics processing units to build it.
“So I think you could say we also like Nvidia on the on the back of [the fact] they would be the ultimate winner or capture a big part of the metaverse ban. But obviously, we don’t factor that in at the moment, [as] it’s not going to happen in the next few years.”
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