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Jefferies says the metaverse is as big an investment opportunity as the early internet, as its research chief lays out the bull case

December 13, 2021

Investors should consider the metaverse as like the early days of the internet, according to Jefferies’ head of thematic research.

Simon Powell noted key stocks to watch, telling CNBC people will want to “own the Ciscos” of the metaverse.Yet many are still skeptical of the idea, with one investor saying proper metaverses are still years away.

Wall Street is getting very excited about the metaverse, with investment bank Jefferies perhaps the most optimistic.

Its head of thematic research Richard Powell told CNBCthat the metaverse is an investment opportunity akin to the early days of the internet.

“The way to think about it is [that] all human activity that hasn’t moved online is about to move online in the next five to 10 years,” he said.”We can only imagine what it can be.”

Powell was speaking to CNBC’s “Worldwide Exchange” on Friday, after Jefferies released a research note saying the metaverse will be the biggest disruption to how people live ever seen.

The metaverse is a fuzzy term that refers to a wide range of virtual worlds, in which people use avatars to play games, watch virtual concerts, work, build things, and even buy and sell crypto assets such as non-fungible tokens, or NFTs.

Social media giant Facebook recently changed its name to Meta to mark a switch in focus to the metaverse. The move spurred a surge of interest in the idea among investors and other technology companies.

Powell said investors should be thinking about investing in the metaverse as though they were investing in the early internet. That means first focusing on hardware providers; then on software providers; then on companies that actually operate inside the technology.

“What did you want to own from 1989 to 2000? You wanted to own the Ciscos of the world. And I think the same is going to be true for the metaverse,” he said.

Powell recommended investors think about chipmakers such as Nvidia and AMD, saying that the push into virtual worlds will require a huge amount of computing power.

He also recommended device manufacturers, for example, those that make virtual reality headsets. “It’s all about infrastructure for the next few years,” he said.

Read more:Universal Music Group bets on the metaverse by partnering with Genies to make digital avatars and wearables

However, there are plenty of skeptics about the metaverse who argue that it’s far too soon to predict whether the idea will become a major part of everyday life.

Jon Jordan, blockchain specialist at venture capital firm Hiro Capital, told Insider that “no one knows what [the metaverse] is.” He added: “Nothing that is yet live, I would call a metaverse.”

The uncertainty makes investing decisions about the metaverse tricky, Jordan said.

Jefferies’ Powell said it’s still uncertain whether the metaverse will be dominated by the likes of Facebook/Meta or by decentralized virtual worlds such as The Sandbox or Decentraland.

Decentralized virtual worlds, in which users can create and sell their own items in the form of NFTs, have recently been attracting a lot of attention, with virtual land selling for millions of dollars.

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