Is Nvidia the Best Metaverse Stock?

Since Facebook recently announced that it would change its name to Meta Platforms (NASDAQ:FB) and shift its focus to VR, the concept of the digital metaverse has been widely discussed among investors.

Meta and Microsoft (NASDAQ:MSFT) are the companies most widely associated with the metaverse. The winning stock of the metaverse race, however, could be chip maker Nvidia (NASDAQ:NVDA). Here’s why.

The Industries Nvidia Powers

As a leading AI chip company, Nvidia is connected a massive range of industries.

The company uses its cutting-edge computing capabilities to power businesses in energy, retail, construction, manufacturing, robotics and healthcare, to name just a few. Now, the company is planning to bring its cross-industry expertise to the digital metaverse.

Thanks to its track record of working within multiple industries, Nvidia is uniquely positioned to help all sorts of businesses take advantage of the metaverse.

CEO Jensen Huang has already described his vision of how the Omniverse could help businesses innovate at lower costs. According to Huang, businesses could simulate entire factories and major power grids in the metaverse. The savings from these simulations could run into the hundreds of billions of dollars as engineers optimize digital designs without the expense of real-world testing.

Nvidia’s Metaverse Customers: Who Are They?

Potentially, almost every one of Nvidia’s current customers could eventually become a metaverse customer. This is because of the role Nvidia plans for the metaverse in its AI development. Simulated robots could operate and learn in the digital world.

Because they could vastly outnumber real-world robots, these simulated robots could be used to quickly refine machine learning algorithms. Similar methods could also perfect autonomous driving systems by subjecting them to millions of digital simulations in a short period of time.

If this initiative comes to fruition, every company that relies on Nvidia’s AI chips for robotics or autonomous control applications could someday benefit from metaverse testing. Needless to say, this would give Nvidia a massive customer base for its metaverse-driven chips and software.

To realize this vision, Nvidia (NVDA) is relying on its own metaverse platform, dubbed Omniverse. Encouragingly, Omniverse has already been used by one high-profile manufacturer, BMW, to digitally simulate an entire real-world factory.

Even without these grand future ambitions, Nvidia is clearly poised to take advantage of the shift to the metaverse through its core graphics processor chip business. The need for high-speed, AI-enabled graphics processing could help Nvidia add $10 billion to its addressable market over the next 5 years alone.

Is Nvidia the Best Metaverse Stock?

There is good reason to think that Nvidia could be the best stock for gaining from the rise of metaverse applications. To start with, its ability to profit from an existing line of GPUs means that the company will do well as other platforms build their initial metaverse applications.

Like most emerging technologies, it could take time for these applications to expand and become profitable. Nvidia, meanwhile, can take a shorter path to profitability by selling the essential hardware other metaverse companies will require.

Nvidia’s vision of honing robots and AI systems in the metaverse also gives it wider reach than any individual platform.

While manufacturers of physical goods may not directly need metaverse applications, they can benefit from robots perfected in digital simulations. This multi-industry approach gives Nvidia the edge when it comes to translating the potential of the metaverse into real-world results for more traditional companies.

Forget Meta and Microsoft, Nvidia Wins Either Way

Nvidia’s role as the leading manufacturer of advanced graphics and AI chips allows it to stand above the fray between Meta and Microsoft.

These two companies have very different metaverse strategies, meaning that investors choosing between the two must decide which one they think is better.

By investing in Nvidia (NVDA), on the other hand, you can win in either scenario. Nvidia (NVDA) stands to gain by providing essential metaverse hardware that will power applications for both of the other major players.

As it expands its metaverse simulations and builds out the Omniverse platform, the company could also be one of the first to profit from industrial metaverse applications.

How High Could Nvidia Go?

Judging how high Nvidia’s stock could go in response to metaverse demand is extremely difficult.

Today, the 12-month average price forecast for the company stands at $3332. This represents an upside of about 10 percent from its current price.

As the metaverse moves from the realm of science fiction into practical reality, though, Nvidia could see strong multiyear gains on top of the current 12-month projections.

What Are the Risks of Buying Nvidia?

While Nvidia itself is an extremely strong company, buying it purely for metaverse exposure does carry certain risks.

The most prominent of these is the possibility that the current excitement around the metaverse is more hype than anything else. This assessment has already raised concerns about Facebook’s Meta rebranding.

Developers have criticized Facebook’s VR platform as having too few business applications. If interest in the metaverse itself wanes, Nvidia’s advantages in that area could have little to contribute to future share prices.

There’s also the chance that Nvidia’s dominance in the metaverse won’t remain. In this regard, however, the company seems fairly safe. The Omniverse platform gives Nvidia a leg up against most of its potential competitors. While that gap could close in the future, no other company is immediately positioned to replace Nvidia as the leading chip maker behind metaverse technologies.

Nvidia is arguably the strongest metaverse stock in the market at the moment. Between its established chip business and Omniverse platform, the company is positioned to benefit both directly and indirectly as the metaverse is built.

Nvidia also has the unique advantage of using the metaverse to address industrial needs across several different sectors. While Meta and Microsoft fight over market share, Nvidia is the company that could be the true metaverse winner.

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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.