In this article, we will take a look at the 10 best metaverse stocks to buy according to hedge funds.
What is the Metaverse?
According to McKinsey & Company, the metaverse is the emerging 3-D-enabled digital space that uses virtual reality, augmented reality, and other advanced internet and semiconductor technology to allow people to have lifelike experiences online.
The basic features of the metaverse include a sense of immersion, real-time interactivity, and user agency. Whereas, the full vision of the metaverse encompasses platforms and devices that work seamlessly with each other, the possibility for thousands of people to interact simultaneously, and use cases well beyond gaming. While the phenomenon gained attention in 2021 with internet searches for the term increasing by 7,200%, it seems here to stay. With lockdowns and work-from-home policies in place, the interest in shared virtual environments spiked. The opportunity remains vast with metaverse having the potential to generate up to $5 trillion in value by 2030.
Is the Metaverse Still Alive?
When the tech guru Mark Zuckerberg changed Facebook’s name to Meta in 2021, he clearly drove the metaverse narrative in the world. Although the vision of a digital future of work and recreation became a buzz for a while, other emerging technologies such as Artificial Intelligence decided to dominate the headlines later.
Questions regarding whether Zuckerberg should have transformed a successful social media company into a VR venture have also been asked. In September 2023, BBC reported that his company’s virtual and augmented reality branch, Reality Labs, has lost $21 billion since the prior year. The firm later introduced its social virtual reality space Horizon Worlds. While some users have complained about not having enough people to make it fun, the platform’s monthly users can simply not match the number of people who consume social media like Facebook and Instagram every day.
Although the company’s virtual reality headset and its Horizon Worlds have not gone mainstream after 3 years of the company’s founding, experts argue that the metaverse is still as relevant as ever. On October 2, CNBC reported that Zuckerberg’s metaverse is finally showing signs of life as his company might have found its footing in VR and AR through a different medium, smart glasses. After the firm witnessed early success in the market for smart glasses via a partnership with Ray-Ban, the CEO unveiled the first “fully-functioning” prototype AR glasses, Orion, in September.
“The right way to look at Orion is as a time machine. These glasses exist, they are awesome and they are a glimpse of a future that I think is going to be pretty exciting.”
Although there might be a lack of connection between the metaverse which was the next big thing two years ago and the prevailing tech landscape dominated by AI, some argue that the reports of the metaverse’s death are ‘exaggerated’ and that it is a rather long-term concept to materialize as a digital future for masses.
With that being said, let’s move to the 10 best metaverse stocks to buy according to hedge funds.
Our Methodology:
In order to compile a list of the 10 best metaverse stocks to buy according to hedge funds, we first used stock screeners, ETFs, and online rankings to make an extended list of the relevant companies. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best metaverse stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Metaverse Stocks To Buy According to Hedge Funds
10. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 34
Unity Software Inc. (NYSE:U) serves as the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content. The company empowers creators across industries and globally. Unity’s platform offers a set of software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices.
Unity remains in a unique position in a vibrant business. With the growing creation of 3D content in interactive entertainment, the company serves as just the right platform provider to fundamentally change how the next generation of content gets created. Since Unity has the opportunity to change how people think about creating interactive content, it can drive them to make more content by enabling them to do it more efficiently and effectively. Therefore, the management remains optimistic on the long-term value of Unity.
In October, the firm launched Unity 6, the most stable and best-performing version of Unity. Unity 6 is curated to allow the creation of better games built more quickly and efficiently than before. Unity’s third-quarter results exceeded its guidance for both revenue and adjusted EBITDA. Key new customer accounts in the quarter included KLM, the Dutch Airline, which is building, a VR cockpit training application and Deutsche Bahn which built a series of systems, and training simulations in Unity.
With the uniqueness of Unity’s platform and the bright future it looks forward to, the company is a promising metaverse stock to buy. As of Q2, Unity Software Inc. (NYSE:U) is held by 34 hedge funds.
9. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 39
Cloudflare, Inc. (NYSE:NET) serves as a global cloud services provider that delivers a range of services to businesses of all sizes and in all geographies. With a massive global network spanning more than 330 locations, Cloudflare content delivery network operates within approximately 50 milliseconds of almost 95% of the Internet-connected population globally.
As one of the many technical platforms that tend to support Web3 and the growing metaverse ecosystem, the firm has been trying to mature the technology needed to provide access to Web3 services at a global scale. In this regard, it announced the opening of its private beta for both the Ethereum and IPFS gateways. During this announcement in 2021, the firm declared that it viewed the Web3 and the Metaverse as an ‘entirely new networking paradigm’ and believed that the first complete metaverse could be built entirely on Cloudflare, using systems like Ethereum, IPFS, RTC, and R2 storage.
For its third quarter ended September 30, Cloudflare, Inc. (NYSE:NET) reported revenue of $430.1 million, up 28% year-over-year. While the firm successfully added a record 219 large customers, it hit a new milestone which is 35% of the Fortune 500 being paying Cloudflare customers currently. Additionally, Cloudflare played a profound role in upholding the democratic process by providing its services to hundreds of government websites in more than half of US states while ensuring that cyberattacks didn’t affect the outcome of the 2024 election.
With an extensive content delivery network and cybersecurity solutions catering to the requirements of the metaverse, Cloudflare, Inc. (NYSE:NET) is well-positioned to play a significant role in the metaverse landscape. As of Q2, the stock is held by 39 hedge funds.
