Betting on innovation is tricky, especially right now. Tech stocks are incredibly volatile, and some are arguably overvalued, despite a deep plunge in stock prices. This makes it difficult to pick winners, even if you can spot a trend.
However, some trends are simply too big to ignore. The metaverse, for instance, could be a multi-trillion-dollar opportunity. Here’s a closer look at this emerging trend in digital technology and a growth stock that could help you bet on its future.
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Understanding the metaverse
The “metaverse” is loosely defined right now, but the dictionary defines it as “a virtual-reality space in which users can interact with a computer-generated environment and other users.”
I would expand that definition to include interactive social games and augmented reality. Industry leaders, such as Mark Zuckerberg, believe the metaverse is a natural evolution of the internet. They believe that today’s chat apps and video conferencing calls will be replaced with augmented reality (AR) or virtual reality (VR) interactions for work and play in the future.
Not everyone agrees with this thesis. However, Zuckerberg alone has deployed billions of dollars into this sector, and several other tech giants are ramping up investments, too. It seems likely that the industry would be worth at least $1 trillion based on these capital expenditures.
Betting on the metaverse
There are several ways to bet on this trend. Investors can seek out companies that manufacture the AR/VR devices or the virtual worlds and software that power these platforms. However, it’s still too early to tell which segment of this new industry will be the most valuable and lucrative.
Investors may want to spread their bets across a portfolio of metaverse stocks through an exchange-traded fund, or ETF. Roundhill Ball Metaverse ETF (NYSEMKT:METV) is an excellent example.
This fund has exposure to over 45 different tech companies that are collectively part of the metaverse transition. The top holdings include chip maker NVIDIA, gaming platform Roblox and, of course, Meta Platforms.
The fund is well diversified. It even has exposure to niche software and gaming stocks in South Korea and China. Many of its holdings are well-established tech giants with sizable profits and a track record of success.
The fund currently has US$385 million, or CA$520 million, in assets under management. That makes it the largest metaverse ETF in the world. And there’s plenty of room to grow. According to the Roundhill team’s estimates, the metaverse could be worth up to $17.5 trillion if these virtual spaces and tools become mainstream by 2030.
Bottom line
Some of the biggest tech companies in the world are betting on a transformation of the global internet. It’s too early to tell if these new ventures are going to be successful. It’s also too early to pick winners. That is why I prefer to bet on an ETF that has exposure to the whole sector.
Roundhill’s Metaverse ETF is probably the best option for investors right now.
