The metaverse is attracting a lot of investors due to its growth potential. The technology brings people into a digital 3D world where they can connect with people. The innovative technology can change how we interact with each other and the world, but there are many unknowns to how it will play out.
The great thing about metaverse stocks is that they have diverse revenue streams that do not rely on the metaverse. Multiple business opportunities are better than taking an all-or-nothing moonshot approach with this groundbreaking technology. Investors looking for some exposure to the metaverse without an all-or-nothing approach may want to consider these three picks.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) stock has been on a tear and recently became a more valuable company than Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
The sudden leap, headlined by a 1,733% gain over the past five years, comes as the company’s AI chips continue to gain market share. These AI chips act as the foundation for metaverse platforms. Without these chips, the metaverse is unsustainable.Â
The metaverse isn’t Nvidia’s only claim to fame, and the company has posted financial results from large-cap stocks that haven’t been seen before. The third quarter of fiscal 2024 featured 206% year-over-year revenue growth and 1,259% year-over-year net income growth. These are the types of numbers investors may expect from a small or micro cap stock. However, Nvidia has been delivering high revenue and earnings growth over the years while trading at a 0.71 PEG ratio.Â
Nvidia has a tremendous runway as more corporations embrace artificial intelligence and turn to chipmakers like Nvidia to make it all possible. The company also has other high-growth segments like gaming and professional visualization which achieved 81% and 108% year-over-year revenue growth respectively.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) had a rough 2022 but has rebounded dramatically since hitting its low. Shares are up by 175% over the past year and a recently announced dividend can drive the stock higher. The company can comfortably support its dividend with its $65.4 billion cash position. The firm looks like it can become a compelling dividend growth stock.Â
Meta Platforms has focused on profitability in recent quarters and tripled its net income year-over-year in Q4 2023. Revenue went up by 25% year-over-year during the same quarter. Facebook and Instagram are the main focuses for the tech giant, but big investments into the metaverse can generate more growth in the long run.
Daily active users across the company’s platforms inched by up 8% year-over-year. That growth rate is solid considering the company already has 3.19 billion daily active users. There’s a limit to how much large platforms can improve year-over-year as they amass vast user bases.
Cloudflare (NET)
Cloudflare (NYSE:NET) isn’t releasing any metaverse applications, but the company’s software is crucial for keeping people safe. As more people use the metaverse, hackers will look for opportunities to steal data and access sensitive information.
Deepfakes are a significant risk in the metaverse. Deepfakes are when someone uses artificial intelligence to imitate the voice and appearance of someone else. Cloudflare’s cybersecurity solutions will become necessary for the metaverse to function in the long run. Cybersecurity measures can increase people’s trust in the technology. Furthermore, the expensive nature of cyberattacks will make leaders in the metaverse more eager to work with cybersecurity giants.
Cloudflare doesn’t need more business from the metaverse to grow. The company reported 32% year-over-year revenue growth in Q4 2023 and signed its biggest customer yet. The company generates plenty of recurring revenue due to monthly and annual subscriptions. Cloudflare is minimizing its net losses and is putting itself in a position to report a profitable quarter in the next 1-3 years.Â
On this date of publication, Marc Guberti held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
