17 Nov 2022
Investing in virtual reality offers an opportunity to get up close to an industry that is transforming entertainment, work healthcare, shopping, and more.
Investing in virtual reality offers an opportunity to get up close to an industry that has transformed nearly everything we do, from entertainment and work to healthcare, shopping, and more. Fueled by demand and rapidly advancing VR technologies, the virtual reality sector could be a game-changer for years to come.
Virtual reality (VR) is a type of technology that creates an immersive experience in a digitally created world or imagined environment. It’s related to augmented reality (AR). Pokémon Go, for example, uses AR to digitally plant Pokémon characters around real-life cities and towns for players to physically go and find. People use VR devices from Meta, HP, and Sony to meet up in virtual luxe resorts, immerse themselves in virtual raves, and virtually fight on battlefields in alternate universes.
Games companies have recognized that players want to be real participants in the action, and have moved light-years beyond the old Nintendo or Atari platforms to rapidly adopt VR hardware, software, and content (1). During the pandemic, virtual reality games like Half Life: Alyx, The Walking Dead: Saints & Sinners, and Iron Man found a ready market and mountains of consumers that ordered their headsets, with each anticipated release of the next game prompting more to order theirs or to upgrade.
But VR isn’t just for gamers. VR and AR are transforming the ways that almost all industries deliver goods and services to consumers. Shoppers are now used to shopping in the virtual retail world (2), exploring kitchen options from the comfort of their couches in AR, thanks to Ikea’s The Place App (3) or using a personalized VR avatar to try on clothes from Hugo Boss (4).
Business teams are finding their virtual work footing with immersive experiences, collaborating remotely around the world, with implications for improving employee health and productivity (5). For those who take well-deserved vacations, even spas now offer multisensory virtual reality and wellness experiences to recharge (6).
Virtual reality has huge potential to improve training for higher education and corporate entities alike. Walmart recognized the opportunity and got on board, training employees with virtual reality programs that offer new hires the opportunity to experience customer situations like Black Friday crowds (7). The military is also using virtual reality for training purposes, and even the Denver Broncos football team is using virtual reality as a tool for training new and injured quarterbacks (8).
The technology also has the potential to be used for highly sophisticated simulations in the healthcare field. Emmanuel Hospice, a non-profit hospice company, offers patients the ability to leave their rooms with virtual reality-based therapy. Using the technology, one patient went on a trip to the lake where she had spent her childhood in Romania, and another took a ride in a hot-air balloon (9).
The metaverse is now taking the immersive experience into other dimensions, as a 3-D virtual network of worlds where people can socialize and collaborate through avatars. First described in 1992 by author Neal Stephenson, the metaverse’s potential for networking, business, and entertainment is being tapped right now, thanks to a powerful confluence of technological advances, major infrastructure investments, explorations by sectors as varied as government to construction and with Gen Z early adopters, and a growing desire for personalized engaging experiences (10).
All in all, tech-minded investors interested in VR don’t just pay attention to the giants of the metaverse and gaming, like Meta, Microsoft, Epic Games, and Roblox. They also track the innovators and technologies that are developing VR to next-gen levels. From big data to chipmakers, enterprise computing to software companies, the opportunities to tap into VR seem endless (11).
With all of these different applications, it’s no surprise that the VR industry is primed to grow rapidly. The global virtual reality market is anticipated to reach $227.34 billion in 2029, a dramatic increase from $11.64 billion in 2021. The virtual reality market isn’t immune to stressors, however. Industry shutdowns during the pandemic delayed components, causing a dip in the market (12).
Nonetheless, the market is ripe for investment. Accelerated development of technologies complementary to VR, like 5G and infrastructure, are driving rapid growth, and the demand for VR technologies is only increasing. As the technology advances, virtual reality is expected to play an increasing role in training and education, entertainment, retail, healthcare, and more.
Just as the technology required for virtual reality is improving, the costs associated with it are decreasing (13). Quality virtual reality experiences require both a headset and a powerful graphics card. These two elements have big-name companies like Sony, Samsung, and Meta, as well as lesser-known companies, competing for market share in each. As virtual reality becomes increasingly mainstream, these companies are poised to benefit.
Beyond these two primary technology elements, virtual reality is also primed to create new investment opportunities in the industries that adopt it. Whether it’s the next big game, the next big hospital training platform, or something we have yet to imagine, industry-specific virtual reality solutions are sure to create a buzz and further stimulate consumer adoption.
When it comes to virtual reality, you can invest in the innovation and technology itself, or the products, services, and solutions that it delivers. Investors should take note that virtual and augmented reality are high-growth, high-volatility sectors, meaning that they can make for risky investments when bought directly. A search on Magnifi suggests that there are a number of other ways to profit from virtual reality innovation via mutual funds and ETFs that cover this fast-growing sector. Try searching for:
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This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. Investors should carefully consider the investment objectives and risks as well as charges and expenses of all innovation-related securities before investing. Read the prospectus carefully before investing. ETFs and mutual funds are actively managed and there is no guarantee that the manager’s investment decisions will produce the desired results. All investments involve risks, including possible loss of principal. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and fund expenses will reduce returns. You should carefully consider a fund’s investment goals, risks, charges and expenses before investing. Download a summary prospectus and/or prospectus, which contains this and other information and read it before you invest or send money.