For investors, the Metaverse emerges as a promising but unpredictable new environment.
To meet the increased demand for metaverse investments, exchange-traded funds have sprung up.
The metaverse, a virtual universe that has become a hot issue among IT businesses, is also gaining a new fan following among investors.
SoftBank Group Corp. announced a $150 million investment in a South Korean metaverse platform.
In recent months, a slew of metaverse-themed exchange-traded funds have debuted, with some exhibiting promising results.
Companies making early bets on what some tech executives have dubbed as the next phase of the internet have seen their stock rise, while others believe it is an exaggerated concept that will take years to fulfill.
“As the physical and digital worlds merge at a rapid pace, we want to be invested in firms that are best positioned to profit from this digital transition,” said Frank Balas, director of investment strategy at GM Advisory Group, which has invested in a metaverse-focused fund.
In October, Mark Zuckerberg announced that Facebook Inc. will be renamed Meta Platforms Inc., and that the firm would invest billions of dollars in the online world. In the weeks that followed, investments in metaverse-related firms increased.
The metaverse is a loosely defined online world where people can engage in immersive events such as virtual concerts, buy digital items, and interact with each other as avatars, using virtual and augmented reality headsets in some situations. Microsoft Corp. and Nvidia Corp. have both declared plans to develop metaverse platforms or tools to aid in the creation of those spaces.
Chipotle Mexican Grill Inc., Verizon Communications Inc., and Nike Inc. are among the consumer-goods businesses that believe in the metaverse’s potential. It has also spurred a boom in digital real estate.
The metaverse, according to Sonu Kalra, a portfolio manager at Fidelity Investments, is another channel of growth that adds to the reasons to invest in strong digital companies. He leads the BlueChip Growth Fund, which has investments in Nvidia, Meta, and Microsoft.
However, he advises caution, claiming that the jury is yet out on what the concrete business potential for organizations will be in many circumstances. “I believe it’s easy to get caught up in the excitement of the metaverse, but at the end of the day, what does it really mean in terms of cash flows to businesses?” he asked.
Regardless these doubts, proponents have started marketing new funds to cash in on the metaverse craze. Fount Investment Co. Ltd. started a metaverse ETF on the day Mr. Zuckerberg announced the name change, and it has subsequently grown to over $8 million in net assets. South Korea and Canada have also developed ETFs with a metaverse concept.
“Investors are excited about the topic,” said Matthew Ball, a venture capitalist who co-founded META ETF with investment company Roundhill Financial Inc. in June.
Those investments, he claims, are less hazardous than those made in companies focused on generating customer experiences, whose prospective returns are more difficult to quantify and follow. Mr. Egan stated, “We want to make bets—no doubt about that.” “However, we don’t want to waste money.”
Since Meta announced its investment ambitions, shares of graphics processor supplier Nvidia have risen by more than 30%. As the business reported strong quarterly results last month, Nvidia Chief Executive Jensen Huang described near-term potential in hardware and software revenues from the metaverse. Mr. Huang stated, “This is going to be one of the largest graphics opportunities that we’ve ever seen.”