How to invest in augmented reality and virtual reality

Augmented Reality (AR) and Virtual Reality (VR) are two of the biggest trends in the tech industry right now. Until now, many of the uses of these emerging technologies have been in the gaming industry, with VR headsets becoming increasingly popular in recent years.

But AR and VR technology is not limited to games, and as working from home becomes a permanent reality for more and more companies, these technologies are likely to expand from consumer markets to enterprise markets. Here’s what else you need to know about virtual and augmented reality.

AR/VR Key Stats:

  • The global virtual reality market is expected to grow from $4.5 billion in 2020 to $22.4 billion in 2025, according to AR research firm ARtillery Intelligence.
  • Consumer spending is expected to make up around 60% of the market in 2025, while business spending is expected to make up 40%, according to ARtillery.
  • The global head-mounted augmented reality market is expected to reach $17.7 billion in 2025, from $1.6 billion in 2020, according to ARtillery.
  • Meta Platform’s Quest 2 VR headset sold 8.7 million units in 2021, according to a report by International Data Corporation, accounting for around 78% of all headset sales.
  • The mobile AR market is expected to reach $36.3 billion worldwide in 2026, from $12.5 billion in 2021, according to ARtillery.

AR/VR: a booming market

AR and VR are two of the fastest growing areas of technology. Global giants such as Facebook’s parent company Meta Platforms, Microsoft and Sony are investing heavily in these technologies to fuel their growth for years to come. According to ARtillery Intelligence, the global virtual reality market is expected to grow at an annual rate of almost 38% from 2020 to 2025, while the global head-mounted augmented reality market is expected to increase 11 times over the same period. .

Growth is expected to be driven by new uses for technology beyond gaming, such as healthcare, engineering, defense and entertainment. Meta plans to spend billions to build the Metaverse, which will rely on VR and AR technology.

Advances in AR/VR Technology

  • Meta Quest 2: The Meta Quest 2 headset has been popular with the gaming community, selling 8.7 million units in 2021. The product comes with a VR headset and two touch controllers that help simulate reality.
  • PlayStation VR2: The PlayStation VR2 is a competitor to the Quest 2 headset and pairs with the PS5 gaming system. The headset follows your eyes, providing a realistic gaming experience.
  • Smart Glasses: Several companies have entered or re-entered the smart glasses market, including Alphabet and Meta. The glasses vary from model to model, but they can allow you to take photos and videos, as well as answer phone calls. Meta has even teamed up with Ray-Ban to appeal to more style-conscious consumers.
  • Apple: Apple has long been rumored to release an AR/VR headset, but until that happens, the tech giant’s many fans can use their iPhones and iPads to access any of the thousands of AR apps on the AppStore. You can see what furniture looks like in your living room before you buy it or play with different filters on Snapchat.

(Check out Bankrate’s list of the best investment apps.)

How to Invest in AR/VR Businesses

If you want to invest in this burgeoning technology, you have several options to consider. You can identify individual companies that you think will benefit from the growth of AR/VR technology and buy their shares, or you can find a mutual fund or ETF that invests in a basket of companies on this theme. Here are some options:

Popular stocks to consider:

  • Meta platforms (META): The company formerly known as Facebook is one of the leaders in AR and VR technology. It invests billions of dollars in the Metaverse and is the maker of the popular Quest 2 headset. Be aware that the vast majority of Meta’s revenue and profit comes from digital advertising through its family of apps such as Facebook, Instagram, and WhatsApp.
  • Alphabet (GOOG): As with Meta, most of Alphabet’s sales and profits come from online advertising, but the company has invested in AR/VR projects that could pay off. It was among the first to introduce a smart glasses product and has nearly unparalleled resources to pursue new opportunities.
  • Microsoft (MSFT): You may think of relatively boring products like Word, Excel, and Powerpoint when you think of Microsoft, but the company is also deeply involved in gaming as the maker of the Xbox. Microsoft too announced its intention to acquire Activision Blizzard in 2022, potentially pushing further into the gaming world.
  • Apple (AAPL): As one of the largest companies in the world, Apple has the ability to quickly launch into almost any market through acquisition or investment in new products. It is rumored to be working on a VR headset and offering iPhone and iPad users access to thousands of AR-enabled apps through its App Store.
  • Nvidia (NVDA): Nvidia makes the technology that powers devices and technologies that use AR and VR. Its graphics processing units are used in images and animation as well as other areas that require high-performance chips, such as games.

Top AR/VR funds to consider:

*Note: data as of June 15, 2022.

  • Communication Services Select Sector SPDR Fund (XLC): This fund holds stocks in companies in the telecommunications services, media and entertainment sectors and includes many companies that stand to benefit from the growth of AR and VR technologies. Around 40% of the fund’s assets are invested in Alphabet and Meta.

Annualized return over 3 years: 5.5%

Spending rate: 0.10 percent

Total assets: $9.3 billion

  • VanEck Semiconductor ETF (SMH): This ETF seeks to track the overall performance of companies involved in the production and equipment of semiconductors. Major holdings include Nvidia, Taiwan Semiconductor (TSM) and Broadcom (AVGO).

Annualized return over 5 years: 22.3%

Spending rate: 0.35 percent

Total assets: $6.9 billion

  • Invesco QQQ Trust (QQQ): This ETF is based on the Nasdaq-100 Index and includes approximately 100 of the largest non-financial companies listed on the Nasdaq stock market based on market capitalization. Major holdings include many AR/VR leaders such as Apple, Microsoft, Nvidia, Alphabet and Meta.

Annualized return over 5 years: 16.1%

Spending rate: 0.20 percent

Total assets: $154.8 billion

Real applications of AR/VR

Although VR and AR technologies sound exciting, the concepts can sometimes seem vague and confusing. Here are some concrete examples of how technology can be put to good use.

  • Education/training: Imagine that medical students could use a VR headset to learn how to perform surgery or observe different areas of the body. Schools can bring complex topics to life by using AR technology to help students understand concepts.
  • Purchases: Many stores now allow you to use their app to try on glasses to see what they look like on your face before you buy or to see what the furniture looks like in your home before ordering. You can even select a pair of shoes to customize through the app before placing an order.
  • Travel/Entertainment: You may soon be able to immerse yourself in fictional worlds using VR headsets. Think about it, Harry Potter fans might feel like students at Hogwarts, while others might be battling the dark side of the Star Wars universe.
  • Repair & maintenance: Mechanics arriving to fix a complex device or piece of equipment may be able to use AR/VR goggles or headsets to quickly diagnose problems and see potential solutions without reading physical manuals or calling headquarters for help. acquire help.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Further, investors are advised that past performance of investment products does not guarantee future price appreciation.