The metaverse has already been through quite the boom-and-bust cycle. The concept burst onto the scene a few years ago, reaching its pinnacle when Mark Zuckerberg renamed his company from Facebook to Meta Platforms (NASDAQ:META). Zuckerberg felt that the metaverse would be a key growth avenue, and the company made a splashy Super Bowl ad to highlight its new direction.
However, growth hasn’t been nearly as easy as anticipated. Meta’s Horizon Worlds has seen sparse usership thus far. And other tech innovations such as AI have sucked up the oxygen from metaverse investments.
But the concept of an online meeting space where people can work, collaborate, socialize and play games together remains compelling. And rapid technological advances will broaden the possibilities of the range of experiences in an augmented reality setting.
With companies such as Apple (NASDAQ:AAPL) investing in the augmented reality (AR) space, metaverse stocks possibly could be in for another big run. These are three leading candidates that will prosper if the sector takes off.
Unity (U)
Unity (NYSE:U) is one of the two primary graphics engines that video game developers use to produce their games.
Unity’s biggest appeal is its interoperability. A developer can build a game in Unity and quickly release it across console, PC, smartphone, AR and virtual reality (VR). In fact, reports suggested that Mark Zuckerberg considered acquiring Unity to make it a core part of the Oculus ecosystem.
However, Unity remained independent. And with U stock now down more than 90% from its all-time highs, shares are near their cheapest ever available price. That could make for a remarkable buying opportunity as Unity gains momentum via partnerships such as its development role for the Apple Vision Pro.
Unity has struggled with monetization, and it generated developer pushback with an unpopular planned price hike last year. The company has had its issues. So, it’s understandable that shares have slipped. But the fall has been excessive, particularly as the company swings to profitability going forward. Any improvement in metaverse sentiment will further speed up the ensuing recover in Unity’s stock price.
Tencent Holdings (TCEHY)
Tencent Holdings (OTCMKTS:TCEHY) is one of China’s leading tech companies. Run as a conglomerate, TCEHY owns and operates a broad array of businesses while maintaining ownership stakes in numerous other companies as well.
It’s no secret that China’s economy has been in a tailspin recently, and investors have shunned the country’s stocks. That includes TCEHY shares, which are down almost 50 percent from their all-time highs. At just 16 times forward earnings, Tencent Holdings is an excellent way to play the recovery in the Chinese technology space.
And it’s a leading metaverse property as well. Tencent Holdings is a leading video game developer, and it also invests in other peers in that space. In particular, its large holding in Epic Games gives it a particular leg up in the metaverse space.
That’s because Epic runs Fortnite, which is arguably the most successful metaverse property to date. Fortnite has gained incredible mind share with younger players which has allowed it to attract large international brands who have set up digital stores in the Fortnite universe. Additionally, Fortnite hosts concerts and media events which attract players for unique experiences and allow all sorts of branding, product sales and other monetization opportunities.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is a large semiconductor company focused on the mobile communications market.
Historically, Qualcomm built its business by designing and licensing the 3G and then 4G technologies that underpin modern mobile communications technology. Qualcomm is pivotal in 5G rollouts now. Yet, it has also diversified, such as with its Snapdragon platform for smartphones and tablets.
That brings us to Qualcomm’s cutting-edge technologies. The company’s stock has soared over the past year thanks to its AI-enabled chips, which can power leading AI applications in a mobile setting.
In addition, Qualcomm is investing heavily in the metaverse. It has set aside $100 million for its Snapdragon Metaverse Fund to foster innovation in the space. And Qualcomm is positioning its combination of 5G, spatial intelligence, advanced hardware and high-sensitive cameras as key tools to power up future metaverse experiences.
On the date of publication, Ian Bezek held a long position in U, META, and QCOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.