In this article, we discuss 10 best metaverse ETFs to buy. If you want to skip our detailed analysis of the metaverse and these ETFs, go directly to 5 Best Metaverse ETFs To Buy.
Metaverse is widely considered to be the future of the internet, where users will be able to collaborate, play games, socialize, and work in 3D spaces. Even education is expected to enter the metaverse very soon, and technology firms are actively working towards dominating the virtual world on all fronts.
The concept of metaverse exploded when Facebook, Mark Zuckerberg’s tech giant, rebranded itself to Meta Platforms, Inc. (NASDAQ:FB), in an effort to reflect its growing focus on the metaverse. Some refer to Zuckerberg as the pioneer of the metaverse concept. Following Meta Platforms, Inc. (NASDAQ:FB), industry leaders like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Snap Inc. (NYSE:SNAP) also immersed themselves into the development of virtual reality.
Development of the Metaverse
YouTube recently jumped on the metaverse bandwagon with an announcement that it is developing a game in virtual reality that is extremely interactive and offers users an immersive experience. Similarly, Microsoft acquired Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game developer, as it moves to enter the metaverse domain. Snapchat is also focusing on the metaverse with its augmented reality filters and lenses that create interactive experiences. Snap’s newest focus is wearable hardware called Spectacles, which were initially normal glasses connected to a Snapchat camera, but will now enter the AR smart glasses territory.
The metaverse represents a revenue opportunity of more than $1 trillion for the companies that are diving headfirst into the space. The common elements of a metaverse include digital currency and assets, NFTs, virtual infrastructure, gaming, natural language processing, virtual social events, workplaces, online shopping, and social media. This is why companies across all spheres are making their moves to enter the metaverse. For example, JPMorgan Chase & Co. (NYSE:JPM) created a digital coin for payments using blockchain technology, and fintech leaders like PayPal Holdings, Inc. (NASDAQ:PYPL), Block, Inc. (NYSE:SQ), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA) are working towards normalizing the adoption of stable cryptocurrencies.
Investors seeking exposure to diversified metaverse stocks can look for metaverse ETFs, and invest in exchange traded funds which hold underlying companies like Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
We selected ETFs that offer exposure to the technology, fintech, semiconductor, and gaming sectors, and their top holdings are market leaders that are set to explore and develop the metaverse.
Photo by David Dvořáček on Unsplash
Best Metaverse ETFs To Buy
10. Global X FinTech ETF (NASDAQ:FINX)
Global X FinTech ETF (NASDAQ:FINX) generally tracks the Indxx Global FinTech Thematic Index, holding companies that are leaders in the emerging financial technology sector. The underlying companies seek to digitally transform mature industries like insurance, fundraising, and third-party lending. Almost 78% of the holdings in Global X FinTech ETF (NASDAQ:FINX) are focused in the information technology sector, while 14% are concentrated in the financial industry.
One of the underlying companies in Global X FinTech ETF (NASDAQ:FINX) is Block, Inc. (NYSE:SQ), which is a financial services and digital payments firm based in San Francisco, California. Jack Dorsey, the Block, Inc. (NYSE:SQ) CEO, aims to make Bitcoin the native cryptocurrency of the internet. Bitcoin is widely referred to as the currency of the metaverse, and Block, Inc. (NYSE:SQ) is one of the top contenders in the metaverse. This makes Global X FinTech ETF (NASDAQ:FINX) one of the top metaverse ETFs to buy.
Block, Inc. (NYSE:SQ) is a popular stock among the smart money. In Q3 2021, hedge fund sentiment was bullish around Block, Inc. (NYSE:SQ), as 98 funds reported owning stakes in the company, up from 94 funds in the quarter earlier. ARK Investment Management held the biggest stake in Block, Inc. (NYSE:SQ) in the third quarter of 2021, with over 6 million shares worth $1.4 billion.
Here is what RiverPark Large Growth Fund has to say about Block, Inc. (NYSE:SQ) in its Q4 2021 investor letter:
“Block (formerly Square): Block declined on mixed quarterly results, management commentary on slowing Cash App growth, and a delay in the closing of the AfterPay acquisition (Block announced the takeover of the global “buy now, pay later” platform in August). Still, SQ reported a strong quarter overall with gross profit growth at 43% year over year (due to passthrough costs, gross profit is more reflective of top-line growth), with gross profit from its Seller Ecosystem growing 48% to $606 million and from its Cash App growing 33% to $512 million. Still, some investors focused on the weaker-than-expected gross profit growth in the company’s Cash App division, creating pressure on the company’s shares. Importantly, Adjusted EBITDA beat expectations, growing 28% to $233 million.
Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers, representing half of first quarter’s gross profit). The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion for 2020, and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $512 million gross profit last quarter) has a particularly large opportunity with its powerful ecosystem of digital financial services, including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app. We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while half of the company’s current profit is from its Seller Business, we believe most of Block’s future value will come from its Cash App business.”
9. ProShares UltraPro QQQ (NASDAQ:TQQQ)
ProShares UltraPro QQQ (NASDAQ:TQQQ) seeks investment results that correspond to three times the daily performance of the Nasdaq 100 Index. Around 70% of the underlying companies are concentrated in the information technology and communications services sectors. The average market cap of the ETF as of December 31, 2021 is $217.79 billion.
A notable position held by ProShares UltraPro QQQ (NASDAQ:TQQQ) is Apple Inc. (NASDAQ:AAPL), one of the most valuable multinational technology firms, providing consumer electronics, software, and online services.
Apple Inc. (NASDAQ:AAPL)’s metaverse ambitions include introducing more augmented reality apps and AR gear such as headsets and smart glasses in the near future. According to CEO Tim Cook, there is “a lot of potential in this space” and the company is “investing accordingly”, in response to a question about Apple Inc. (NASDAQ:AAPL)’s plans for the metaverse.
Apple Inc. (NASDAQ:AAPL) is one of the favorite technology stocks among smart investors. In Q3 2021, 120 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), with collective stakes amounting to $146 billion. Warren Buffett’s Berkshire Hathaway held the biggest position in the company, with more than 887 million shares worth $125.5 billion.
In addition to Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL) is a popular metaverse stock to explore.
Here is what Alger Spectra Fund has to say about Apple Inc. (NASDAQ:AAPL) in its Q4 2021 investor letter:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives tight engagement with consumers and enterprises, fostering the growing purchases of high-margin services like music, apps and Apple Pay. Apple’s quarterly earnings exceeded street estimates on strong margin realization driven by a sales mix of more profitable services. The margin strength was even more impressive given significantly higher freight costs and supply constraints that prevented approximately $6 billion in revenue realization.”
8. SPDR S&P Software & Services ETF (NYSE:XSW)
SPDR S&P Software & Services ETF (NYSE:XSW) is an exchange traded fund that tracks the total return performance of the S&P Software & Services Select Industry Index, which represents the software and services segment of the S&P Total Market Index, an index tracking the broad U.S. equity market. As of February 16, 2022, the assets under management at SPDR S&P Software & Services ETF (NYSE:XSW) amounted to $327.29 million.
Zynga Inc. (NASDAQ:ZNGA) is the top company from the 201 holdings of SPDR S&P Software & Services ETF (NYSE:XSW). Zynga Inc. (NASDAQ:ZNGA) is a California-based company that develops social games and to dominate the metaverse. The company is taking blockchain games to the mainstream. Other significant holdings that make SPDR S&P Software & Services ETF (NYSE:XSW) a prominent metaverse ETF to look out for include Citrix Systems, Inc. (NASDAQ:CTXS), a multinational cloud computing and virtualization technology company, and Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game holding company.
A total of 52 hedge funds held long positions in Zynga Inc. (NASDAQ:ZNGA) at the close of the third quarter of 2021, up from 49 funds in the quarter earlier. Diamond Hill Capital held the leading stake in Zynga Inc. (NASDAQ:ZNGA) as of Q3 2021, with 19.2 million shares worth over $145 million.
Here is what ClearBridge Mid Cap Growth Strategy has to say about Zynga Inc. (NASDAQ:ZNGA) in its Q3 2021 investor letter:
“A handful of our rapid growers hit tough earnings comparisons over the summer after experiencing a surge in demand in the second quarter of 2020 as companies moved to remote work and consumers were confined to their homes. Zynga, which develops games played on social and mobile platforms, experienced a significant uptick in new customers last year but has not seen as much retention and gaming usage as the economy has reopened.”
7. Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT)
Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT) is a passively managed exchange traded fund that uses a full replication strategy to mirror the Information Technology Spliced Idx, with $58.5 billion in total net assets and 360 stocks as of January 31, 2022.
One of the top holdings of Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT) is Microsoft Corporation (NASDAQ:MSFT), which is one of the best multinational tech firms that is diving headfirst into the metaverse with the recent $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game developer. The gaming company owns intellectual rights to mainstream games like Call of Duty, Guitar Hero, World of Warcraft, Diablo, Heroes of the Storm, Overwatch, and Candy Crush Saga, among others.
Elite hedge funds are extremely bullish on Microsoft Corporation (NASDAQ:MSFT). According to the Q3 database of Insider Monkey, 250 hedge funds were long Microsoft Corporation (NASDAQ:MSFT), up from 238 funds in the preceding quarter. Fisher Asset Management held the largest position in Microsoft Corporation (NASDAQ:MSFT) in Q3 2021, with 25.5 million shares worth over $7 billion.
Here is what Baron Opportunity Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2021 investor letter:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft’s results continued to be strong across the board, with total revenue beating Street estimates by 4.5%, an acceleration in Commercial Cloud revenue to 31% constant-currency growth, a four-point improvement in Commercial Cloud gross margins (to 70% from 66%), and GAAP earnings up 42%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by TAM expansion across its disruptive cloud product portfolio, as more companies look to transform and digitize their businesses, as well as strong operating leverage as its cloud products gain scale.”
6. Fidelity MSCI Information Technology Index ETF (NYSE:FTEC)
Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) is a technology-focused ETF that tracks the performance of the MSCI USA IMI Information Technology Index, which represents the companies from the IT sector in the U.S. equity market. The top 10 holdings of Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) make up almost 65% of its total investments, which comprise 368 securities.
A top holding of Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) is NVIDIA Corporation (NASDAQ:NVDA), a multinational technology company providing products and services to the semiconductor, artificial intelligence, consumer electronics, gaming, and computer hardware industries.
The metaverse depends on graphics computing technology provided by companies like NVIDIA Corporation (NASDAQ:NVDA), which is also offering free software to artists and content creators developing virtual worlds for the metaverse, in addition to making technology deals with multiple marketplaces that sell NFTs and 3D content.
Of the 83 hedge funds that were bullish on NVIDIA Corporation (NASDAQ:NVDA) in Q3 2021, Rajiv Jain’s GQG Partners held the leading stake in the company, with more than 15 million shares worth $3.13 billion.
NVIDIA Corporation (NASDAQ:NVDA) is one of the best positioned companies to explore and develop the metaverse, just like Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Harding Loevner Global Equity Fund has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2021 investor letter:
“The proliferation of devices using chips, whether EVs, “things” in lol, or embedded systems more generally, results in the generation of oceans of data potentially needing to be stored, processed, and analyzed. NVIDIA, the leading chip designer well known for its graphic processing units and its complementary CUDA software ecosystem, is at the forefront of the effort to provide the analytical platform needed to unlock the full potential of such specialist processors.”
Click to continue reading and see 5 Best Metaverse ETFs To Buy.
Suggested articles:
- 10 Cryptocurrencies Reddit is Buying for the Next Bull Run
- 10 Best EV Battery Stocks To Invest In
- 11 Best Depressed Stocks To Invest In
Disclosure: None. 10 Best Metaverse ETFs To Buy is originally published on Insider Monkey.
