The world of technology is constantly changing, and one of the most exciting developments in recent years is virtual reality (VR). With the emergence of VR and augmented reality (AR), new and exciting investment opportunities are opening up for investors. In this article, we present the VR/AR sector in general and a selection of virtual reality stocks in detail.
WHAT IS VIRTUAL REALITY?
Virtual reality, or VR for short, is a computer-generated simulation that allows users to immerse themselves in an artificial, three-dimensional environment. Using special VR glasses and headsets, users can immerse themselves visually and acoustically in a virtual world and move around in it. The technology has the potential to fundamentally change the way we learn, work and play.
WHAT IS AUGMENTED REALITY?
Augmented reality is a technology that superimposes digital information or images onto the real environment. In contrast to virtual reality, which creates a completely artificial environment, augmented reality expands the real world with additional information or graphics.
WHERE ARE VR AND AR USED TODAY?
VR and AR have already found their way into various areas of our lives. In the leisure sector, they are best known for video games. But the technologies are also being used more and more in professional life.
Gaming
In the gaming sector, VR and AR have opened up a new dimension of gaming. Players can immerse themselves in virtual worlds and experience them in a way that is not possible on a conventional screen. They can move freely in these worlds, interact with objects and even communicate with other players in real time.
Some of the leading companies in this field are Oculus with their VR headsets, Valve with the Valve Index and Sony with the PlayStation VR. These companies have developed VR headsets that are specifically tailored to the needs of gamers and offer an immersive gaming experience.
Medicine
In medicine, VR and AR are increasingly being used to train and educate specialist staff. Surgeons, for example, can practice complex operations in a virtual environment before performing them on patients. VR and AR are also being used to treat phobias and other mental illnesses by enabling patients to confront their fears in a safe and controlled environment.
Architecture and engineering
In architecture and engineering, VR and AR enable the visualization of construction projects before ground is broken. Architects and engineers can "walk through" their designs in the planning phase, identify problems and make changes before construction begins. This saves time and money and leads to better results.
Retail trade
Virtual reality and augmented reality are used in retail to offer customers an improved shopping experience. For example, customers can digitally place furniture in their own home before they buy it or try on clothes on a virtual avatar.
FUTURE POTENTIAL
The future potential of VR and AR appears to be huge. Experts predict that the technology will be used in more and more areas in the coming years. The areas of education, healthcare and industry are particularly promising.
Education
In the field of education, the use of VR and AR creates new opportunities to make learning more interactive and engaging. For example, pupils could learn about historical events not just from books, but experience them "live" in a three-dimensional environment. Or complex scientific concepts could be visualized and viewed from different perspectives to promote a deeper understanding.
Healthcare
In the healthcare sector, virtual reality and augmented reality offer the potential to open up new ways of improving patient care and are already in use today in some cases. Doctors can plan and practice complex operations in a virtual environment, which can lead to more precise and safer interventions. On the other hand, patients could benefit from rehabilitation exercises in a virtual environment that is specifically tailored to their needs and helps them to recover more quickly.
Industry
The use of VR and AR also has the potential to help increase efficiency and safety in the area of industrial production and maintenance. Instead of relying on two-dimensional plans, it is possible for engineers to design and test machines and systems in a virtual environment. By training in a virtual environment, workers in the future could practice dangerous tasks and improve their skills before performing them in the real world.
For investors, this means that there are a large number of companies operating in these areas with potential for future growth. Virtual reality stocks could therefore be an interesting addition to any portfolio.
SELECTION OF LARGE AND WELL-KNOWN VR SHARES AT A GLANCE
The following table provides an overview of a selection of shares in companies active in the VR and AR sector. Companies active in this area are generally based in the technology sector and range from developers of VR headsets and AR glasses to manufacturers of hardware and software. The top VR stocks include many of the tech giants from the USA, such as Meta Platforms, Alphabet, Microsoft and Apple, all of which are involved in the development of VR and AR technologies. Chip manufacturers such as NVIDIA and AMD also play an important role in providing the necessary computing power for VR and AR applications. The selection of European VR stocks, on the other hand, is comparatively small. Ubisoft Entertainment from France is a video game company that has invested in VR in recent years and has developed several games that are compatible with VR headsets. Immersion Corporation, also from France, specializes in haptic technology, which is used in many VR and AR applications.
USD 233.68 billion
| Company | Symbol | Country | Market capitalization |
| Apple Inc. | AAPL | USA | 3080.15 billion USD |
| Microsoft Corp | MSFT | USA | USD 2515.95 billion |
| Alphabet Inc. Class A | GOOGL | USA | USD 1685.53 billion |
| NVDIA Corporation | NVDA | USA | USD 1154.73 billion |
| Meta Platforms Inc. | META | USA | USD 834.12 billion |
| Advanced Micro Devices Inc. | AMD | USA | USD 283.15 billion |
| Qualcomm Incorporated | QCOM | USA | 144.24 billion USD |
| Sony Group Corp | SONY | Headquarters: Japan / Share: USA | 115.86 billion USD |
| African Rainbow Materials | ARI | South Africa | USD 2.4 billion |
| Ubisoft Entertainment | UBI | France | USD 4.15 billion |
| Immersion SA | IMMR | Head office: France / Share: USA | USD 0.23 billion |
APPLE
- Company: Apple Inc.
- Symbol (TWS): AAPL
- ISIN: US0378331005
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 3018.15 billion
- Turnover (TTM) in USD: 385.1 billion
Apple is known for continuously bringing innovative products to the market. From the Apple II to the iPhone and the Apple Watch, Apple has repeatedly achieved technological breakthroughs. Now Apple has unveiled a new product: the Vision Pro. These are augmented reality glasses, the company's first new product category since the introduction of the Apple Watch nine years ago.
The Vision Pro, which looks like a pair of ski goggles, is described as a 'spatial computer' as it allows users to superimpose virtual images, videos and applications onto surfaces in the real world. Using eye and hand tracking, the wearer can interact with what they see - for example, plucking in the air can zoom in or out on a photo.
Apple believes it can compete at this price with "higher quality components and a focus on user privacy", according to Apple Insider. Only time will tell if the market agrees. However, Apple has consistently charged more for its MacBooks and iPhones than its competitors for comparable products, and the company appears to be banking on leveraging that same brand awareness and customer loyalty for its VR headsets. Apple is reportedly working on a more affordable version of the Vision Pro, similar to its lower-cost versions of the iPhone Pro and MacBook Pro.
Brief analysis & outlook
Apple shares have proven to be a top performer this year. Despite declining sales in the last two quarters and probably also in the June quarter, Apple's share price has risen by more than 50 % since the beginning of the year and has already reached new all-time highs several times.
Analysts expect Apple to post earnings of $1.19 per share in the June quarter, down $1% year-over-year, on revenue of $81.7 billion, down $2 %. Despite these figures, sales and profits are expected to grow again in the September quarter thanks to the launch of the iPhone 15 series.
The two most important drivers of the Apple share are currently still the iPhone and the various Apple services. However, this could change at the beginning of next year when the company launches its mixed reality headset on the market.
META PLATFORMS (FACEBOOK)
- Company: Meta Platforms Inc.
- Symbol (TWS): FB
- ISIN: US30303M1027
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 834.12 billion
- Turnover (TTM) in USD: 117.37 billion.
Meta Platforms - formerly Facebook - is one of the world's leading social media companies. Meta focuses primarily on the development of products that enable people to connect with each other via various devices. Facebook acquired the leading VR company Oculus back in 2014. Since then, Facebook and Meta have supported the company in the development of its virtual reality headsets and software as well as in the marketing of its products. In 2017, CEO Mark Zuckerberg declared that he wanted 1 billion people to use virtual reality. As the market leader in VR technology and with a CEO who is enthusiastic about the potential of this technology, Meta Platforms is an interesting share for investors who want to invest in the virtual reality trend.
Brief analysis & outlook
Meta delivered an impressive performance in the second quarter of financial year 2023. Daily active users increased by 7 % to 3.07 billion and monthly active users by 6 %. Revenue increased by 11 % to 32 billion dollars, significantly exceeding analysts' expectations. Earnings per share amounted to 2.98 dollars, which corresponds to growth of 21 %.
Overall, the company is characterized by high margins. Gross margins increased from 78.7 % to 81.4 % compared to the previous quarter and the free cash flow margin amounted to 34 %. This means that 1 $ turnover is converted into 0.34 $ cash, which is available for share buybacks, dividends and investments. The profit margin also increased from 19.9 % to an impressive 24.3 %.
Despite the challenges, such as the fluctuating demand for digital advertising and the massive investments in VR/AR technologies, Meta is optimistic about the future and the focus on the metaverse and VR technology remains a priority.
MICROSOFT
- Company: Microsoft Corporation
- Symbol (TWS): MSFT
- ISIN: US5949181045
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 2515.95 billion
- Turnover (TTM) in USD: 207.59 billion
Microsoft is an international technology company that specializes in the development of computer software and consumer electronics, and while other virtual reality companies focus on the consumer sector, Microsoft has taken its capabilities directly to its enterprise customers. Microsoft's HoloLens 2 is a head-worn mixed reality device that enables a whole new way of interacting with information. It allows employees to connect with remote colleagues in real time while working together on a holographic canvas superimposed on their physical environment to quickly solve problems on the spot.
Brief analysis & outlook
Microsoft has firmly established itself as one of the largest technology companies in the world and is using its resources to make ground-breaking advances in VR/AR technology. With products such as the HP Reverb G2 and the HoloLens 2, Microsoft is setting new standards in both gaming and business environments. The HoloLens 2 in particular has the potential to radically change the way we work and learn, as has already been demonstrated in use cases in manufacturing, education and healthcare.
Despite some challenges, such as technical issues with the HoloLens reported by the US military, Microsoft remains optimistic. The planned acquisition of Activision Blizzard could further strengthen Microsoft's commitment to VR and the emerging metaverse. In addition, the future integration of artificial intelligence, although still in its infancy, could catapult the company into a leading position in these rapidly evolving technologies. However, Microsoft's growth in these areas is expected to take some time, as management points out, and the company is focused on the long-term value of these investments.
SONY
- Company: Sony Group Corporation
- Symbol (TWS): SONY
- ISIN: US8356993076
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 115.86 billion
- Turnover (TTM) in USD: 82.76 billion.
Sony Group Corporation is a Japanese multinational company that specializes in the design and sale of consumer electronics and has development platforms for video games. Headquartered in Tokyo, Japan, Sony Group Corporation operates on the hardware side of the virtual reality ecosystem and designs and sells the PlayStation PS VR headset. Compared to other VR companies with a weak financial position, Sony is an established player, selling millions of units of its game consoles and generating nearly 100 billion US dollars in revenue annually. With PlayStation VR, Sony has developed its own virtual reality headset that is compatible with its popular PlayStation consoles. In conjunction with the PS4 or PS5, this makes it possible to experience gaming in virtual reality.
Brief analysis & outlook
Sony has been heavily involved in the field of virtual and augmented reality in recent years. Their PS VR headset has been one of the best-selling VR headsets since its launch in 2016 and received a major update in 2023 with the PlayStation VR 2. Despite the higher price of $550 for the PS VR 2 compared to $400 for the original PSVR, consumers seem willing to pay higher prices for higher quality VR experiences.
In addition to hardware, Sony has expanded its VR strategy to include content creation. In June 2022, Sony CEO Kenichiro Yoshida described the metaverse as an "area of great potential and opportunity" and sees it as a new growth area. Here, Sony is focusing on entertainment, such as live concerts in the gaming sector or the partnership with Manchester City Football Club to create a virtual stadium.
Sony's key financial figures underline the company's solid position in the market. Sony has grown its profits faster than the industry in recent years and has a return on equity of 12.9% and a net margin of 8.1%. Sony's debt-to-equity ratio is 51.6% and the company has cash and short-term investments of $5.2 billion.
Goldman Sachs also highlights Sony, citing the company's growing involvement in anime through its streaming service Crunchyroll as a reason for upgrading the company to "Buy". Sony can benefit from the increasing demand for anime content, as Goldman Sachs expects Crunchyroll to help boost the company's operating profits and increase demand for anime content globally.
QUALCOMM
- Company: QUALCOMM Incorporated
- Symbol (TWS): QCOM
- ISIN: US7475251036
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 114.24 billion
- Turnover (TTM) in USD: 41.07 billion
Qualcomm is a technology company that develops semiconductors, software and services in the field of wireless technology for the masses. The company is also a driving force behind the development, deployment and expansion of 5G and holds patents that are critical to 5G wireless standards. Of particular note are Qualcomm's Snapdragon processors, which power all major existing VR headsets and are used in Android and Windows smartphones, laptops, tablets and smartwatches. In addition, the Snapdragon chipset is even used in Meta's Oculus Quest 2. With its increasing focus on smartphones, Qualcomm is particularly interesting for those who believe that the future of VR is mobile rather than PC-based.
Brief analysis & outlook
As one of the leading companies in the semiconductor and mobile technology industry, Qualcomm is very well positioned to continue to play a dominant role in VR and AR. Qualcomm is committed to remaining at the forefront of technological innovation and has already entered into important partnerships with major companies such as Meta and Microsoft. However, a risk for Qualcomm is that customers, particularly Meta, who dominate the XR (extended reality) device market, are planning to develop their own chipsets. This could be a potential obstacle to Qualcomm's sales growth in the future.