Extended reality (XR) stocks, which encompasses both augmented reality (AR) and virtual reality (VR), are gaining traction in the stock market and among investors. Powered by secular tailwinds, the opportunities in the space are tremendous.
The revenue in the AR and VR market is projected to reach $31.12 billion in 2023, according to data from Statista. The AR & VR market is forecast to exhibit a compound annual growth rate of 13.72% from 2023 to 2027, leading to an estimated market volume of $52.05 billion by 2027.
Investors have the potential to capitalize on XR stocks as the industry continues to grow. These stocks are involved in developing, producing, and distributing AR and VR technology. Those looking for the best AR/VR stocks to buy now should pay close attention to the following companies.
Meta Platforms (META)
When discussing VR, it’s impossible not to mention Meta Platforms (NASDAQ:META), formerly Facebook. The social media conglomerate is perhaps the biggest enterprise to go all in on the various facets of Web 3.0. But there are growing pains to consider as well. Reality Labs, a division responsible for metaverse projects, has recorded a combined loss of almost $24 billion during 2021 and 2022.
However, CEO Mark Zuckerberg recently confirmed the company’s focus remains on artificial intelligence (AI) and the metaverse, calling these the two major technical waves driving their roadmap today and long-term. The company’s ambitions are clear, as it has over 500 apps on its VR devices.
As a leader in the VR space, Meta already has a significant head start in monetizing the technology. However, Meta and other tech giants face numerous regulatory headwinds, which could impact future growth. Additionally, Facebook’s declining user base may hurt advertising revenue, which Meta needs to support its VR efforts.
At this point, Meta Platforms is solidly behind its ambitions. Whether that will change in the long run remains to be seen. Although the investment draws criticism, it can potentially create a substantial revenue stream.
Matterport (NASDAQ:MTTR), a spatial data firm, is the smallest company on this list by market cap. Despite its size, it has significant potential. In the fourth quarter of 2022, Matterport reported impressive revenue growth, with record subscription revenue at $19.3 million and a nearly 40% increase in total subscribers year-over-year.
Matterport employs 3D cameras and other advanced technology, called digital twin, to copy the physical world into a virtual environment. Their technology could have a significant role in the growth of the metaverse and virtual reality.
The stock is a deep value play in my eyes. It enjoyed strong performance during the pandemic, during a general boom time for growth stocks. However, now things are a bit different. Investors are moving their capital to safer areas. However, that opens up a great opportunity to invest in growth-oriented tech stocks such as MTTR.
Microsoft (NASDAQ:MSFT), known for its Windows operating system, entered the XR world with the introduction of its HoloLens headset which is supported by their Windows Mixed Reality platform.
In 2022, Microsoft achieved record earnings, generating $198 billion in revenue and $83 billion in operating income. Additionally, Microsoft Cloud surpassed $100 billion in annualized revenue for the first time. This demonstrates that the company has ample resources to compete effectively in the XR space.
In addition, Microsoft is making notable strides in the field through its partnership with OpenAI, the company responsible for the popular ChatGPT software. The company’s cumulative investment in OpenAI is reportedly nearly $13 billion, resulting in a valuation of around $29 billion for the startup.
Collaborating with OpenAI, Microsoft is working towards developing innovative AI technologies that have various applications in different sectors, ranging from healthcare to finance and transportation. As a result of these investments, Microsoft is an exceptional pick among AR and VR stocks. Given its scale and financial resources, Microsoft is in a position few can match.
On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.