What are the best virtual reality stocks to buy now? We compare chipmakers, headset producers, and advertising platforms.
When Facebook acquired Oculus Rift for $2 billion in 2014, shock waves reverberated around Silicon Valley. The entire market size for virtual reality wasn’t much larger so what did Mark Zuckerberg know about the future to warrant splashing out so heavily?
Zuckerberg and the executive team at Facebook were betting on massive growth in virtual reality and they have been proven right with annual growth rates north of 50% since.
But just because they bet big on one aspect of virtual reality with Oculus doesn’t mean there aren’t other ways to make money from virtual reality.
We look at some of the best virtual reality stocks to buy now in order to identify which have the biggest potential to affect your portfolio.
Top Virtual Reality Stocks To Buy: FACEBOOK (NASDAQ: FB)
Facebook (NASDAQ:FB) is best known as the social media platform but it hasn’t rested on its laurels despite acquiring about a third of the world’s population as users.
With an eye on the future, Facebook is betting that virtual reality will be a big hit with a significant number of its users.
But Mark Zuckerberg has always claimed that Facebook will remain free. So, how can Facebook make a killing when its users don’t pay a dime?
The answer is by charging content producers who provide content via Oculus headsets.
Similar to how Apple (NASDAQ:AAPL) takes a cut of revenue earned by app producers in its AppStore, so too does Facebook plan to take a cut of the virtual reality content produced by suppliers.
While adoption rates have been mediocre so far, ever more content combined with untethered headsets that make installation easy could lead to an exponential increase in user numbers and a boon for Facebook.
Virtual Reality Stocks To Invest In: NVIDIA (NASDAQ:NVDA)
Where Facebook has an opportunity to monetize the broad adoption of virtual reality through content revenues, Nvidia (NASDAQ:NVDA) can do so by designing the chips upon which headsets rely to create 3D virtual reality experiences.
Nvidia is best known for creating chips that support the massive video gaming industry. And a natural evolution of that industry is VR, or virtual reality.
To prepare for virtual reality going mainstream, Nvidia has created an entire division, called Virtual Reality(VR), which it expects will help power transformation in the entertainment, social, and communication industries, as well as more broadly in businesses.
Nvidia designs leading Pascal GPUs, drivers, and SDKs to meet the needs of gamers, developers, and professionals.
According to Nvidia, some of the ways it is powering the virtual reality revolution include:
Building the fastest GPUs for VR
Creating VRWorks software development kit for headset and application developers
Developing game-ready drivers that work from day one
Creating a GeForce GTX VR Ready program so consumers know which devices can support VR
VR-ready notebooks powered by Nvidia chips
Nvidia GPUs are powering Oculus Ready PCs
Accelerating 360-degree view for virtual reality
Advancing performance for mobile VR
Virtual Reality Stocks To Watch: SONY (NYSE:SNE)
Sony (NYSE:SNE) has a huge advantage when it comes to virtual reality because tens of millions of users trust the Sony PS4.
As gaming evolves to include ever more virtual reality simulated environments, Sony is positioned to capitalize on the natural upgrade cycle.
Sony PS4 users don’t need to be educated on how to use the device the same way Facebook must train users to learn Oculus Go.
It’s no wonder that Sony is the standout leader in the virtual reality field having acquired over 10 million users already.
The challenge for Sony will be maintaining its lead as competition grows ever more fierce from an onslaught of rivals, including deep-pocketed rivals like Facebook and Alphabet.
Years ago, the Sony Walkman was the music device but along came Apple and made it so much better with the iPod. The rest is history.
Similarly, Sony will need to keep pace technologically to stay ahead of the competition. What that future looks like is hard to foresee but it will likely begin with an untethered headset, where Facebook already has the lead.
Best Virtual Reality Stocks: ALPHABET (NASDAQ: GOOG)
Where Facebook may be a content play, Nvidia a chip play, and Sony a headset or device play, Alphabet, better known to the general public as Google, is likely going to target an advertising opportunity.
Think of the target VR market for Alphabet (NASDAQ:GOOGL) in similar terms to its target market for mobile devices.
Thanks to its Android operating system, Google has a massive market share in lower end phones as well as many high-end mobile phones. While Apple owns iPhones, Google owns most of the rest of the world.
If Alphabet takes that same approach when it comes to virtual reality, it may make up in volume what it loses in the high-end of the market. Another way of saying that is Alphabet may not make as much per user but it can target a far larger number of users.
What would a VR application launched by Alphabet look like? You don’t need to look beyond Google Earth for an example.
Virtual Reality Stocks ETF: MOTIF
While no clear cut virtual reality ETF, or exchange-traded fund, exists, you can still create your own version of an ETF fund using a motif.
Motif is a company that makes it possible to create a motif, which is essentially a collection of stocks, for the same price as you would buy a single stock at a traditional broker, like TD Ameritrade.
The way it works is you add the stocks you want to your motif and make a purchase. If someone else then purchases the same motif, you can actually earn a commission.
Virtual Reality Stocks Takeaway
The best virtual reality stocks include Facebook, Sony, Alphabet, and Nvidia.
Facebook is a play on the future development of virtual reality content, and is essentially a bet that the social media company will monetize VR content similar to the way Apple makes money from app producers.
Sony is the leader in virtual reality currently thanks to gamers who are fans of its PS4 device adopting its VR devices.
For a pure play at the chip level, Nvidia is the standout leader. Not only has Nvidia led the way in developing chips but it provides software kits for developers and is influential in defining VR standards too.
Last but not least on the list is Alphabet, which is most likely to monetize virtual reality through ad placements similar to how it earns revenues from YouTube and AdSense.
Do you have a virtual reality stocks list? What good virtual reality stocks have you found? Join us and let us know!
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.