Consumers want an escape, and VR is here to help.
Once upon a time, virtual reality was hailed as the next big thing. One day, so the story went, you’d be able to strap on a headset and go anywhere your imagination could take you. Unfortunately, VR has largely failed to live up to the hype of just half a decade ago — expensive headsets combined with a lack of content to draw in consumers meant that much of the excitement over this technology has fizzled out. But for the companies that stuck with it and continued to develop VR technology over the last few years, the opportunity has never been bigger. From gaming and education to consumer goods and industrial manufacturing, nearly every industry on the market can benefit from advances in VR technology. Here are eight top virtual reality stocks to watch that are at the forefront of this cutting-edge industry.
Facebook (ticker: FB)
Facebook continues to be the leader in the virtual reality industry, a spot it claimed for itself when the company purchased Oculus in 2014. The last version of the headset, the Oculus Quest, has been well received by consumers. In its first year on the market, Facebook sold more than $100 million in VR content, though sales declined in the third quarter as Facebook rolled out its new Oculus Quest 2 in October 2020. The new headset is an upgraded version of the original Quest and has debuted to rave reviews, but competition from new Sony (SNE) and Microsoft (MSFT) gaming consoles means that when sales figures are released in January, they likely won’t blow investors away. Still, Facebook’s commitment to constantly improving its VR experience makes it the top contender among virtual reality stocks.
Sony Corp. (SNE)
The opportunity for virtual reality in the video game market is obvious — after all, who wouldn’t want to step into their favorite video game? Sony has decided to capitalize on this demand and become the go-to company for VR gaming with its PlayStation VR headset. Unit sales of the PSVR since its debut in October 2016 topped 5 million back in January 2020, making it the best-selling virtual reality headset on the market, and sales have only risen in the last 12 months. Although Sony has made it clear that the new PlayStation 5 is compatible with the PSVR, the company has yet to announce any upcoming games that utilize the console’s computing power with the PSVR. But a popular new console and the best-selling VR headset on the market is a combination that investors should be excited for today.
Microsoft Corp. (MSFT)
Microsoft has no plans to enable VR capabilities with its new Xbox Series X console, leaving Sony to take on Facebook in the VR gaming market. But that doesn’t mean Microsoft is simply sitting on the sidelines — it’s just taking a different path to virtual reality dominance. In 2019, Microsoft pivoted into enterprise solutions with the release of the HoloLens 2, a mixed reality headset that’s a huge step up from the original HoloLens in virtually every way. Larger, more comfortable, and with a souped up interface, the HoloLens 2 is a great way to teach employees new skills or guide someone through a difficult, technical operation. Maybe that’s why Lockheed Martin Corp. (LMT) uses the HoloLens to help build the Orion spacecraft, and it’s certainly why investors should keep Microsoft in mind when considering today’s top virtual reality stocks.
While a lot of hype is focused on virtual reality, investors shouldn’t dismiss augmented reality (AR). That was the mistake Alphabet made years ago — the company rolled out the Google Daydream VR headset to much fanfare in 2016, before discontinuing it in 2019. Other attempts include the low-cost Google Cardboard VR headset, as well as an attempt at AR with Google Glass. While those efforts have largely gone nowhere, its Google Pixel smartphones, Google Lens app and even Google Maps all utilize AR to some extent. As the reach of AR expands, it’s likely Alphabet will incorporate it somehow in YouTube, and newer efforts like streaming service Google Stadia present opportunities in the gaming market. Although Google hasn’t plunged headfirst into the virtual reality market, the breadth of its products combined with its deep pockets and a clear interest in VR/AR technology makes Alphabet a VR stock to watch.
It has long been rumored that Apple is getting into the VR headset business, and where there’s smoke there’s usually fire. Apple is showing all the classic signs of a Big Tech company trying to break into a new market, with an acquisition spree that includes headset maker Vrana in 2017 and AR glasses maker Akonia Holographics in 2018. Two new acquisitions in 2020 have only added fuel to the fire: In April, Apple bought NextVR, a virtual reality events company, followed by the August acquisition of VR startup Spaces, which creates themed virtual reality environments. It’s clear that Apple is building something, though no one can say for certain when the company will unveil its creation. That makes Apple a speculative VR investment, but where Apple goes investors should follow.
Investing in the companies that make VR headsets is a smart bet on the future of a fast-growing industry, but what about what’s under the hood? Qualcomm produces key components found in more than 30 AR and VR headsets, including Facebook’s Oculus Quest 2, making it the leader in powering virtual reality. The key is Qualcomm’s Snapdragon XR2 chipset platform, the “world’s first 5G XR platform,” which not only makes stand-alone VR headsets work, but also works with cheaper, lightweight headsets that connect to a phone. “XR” is short for “extended reality.” And while the XR2 is the latest and greatest in VR technology, Qualcomm’s XL1 and Snapdragon 835 processors continue to be used by headset makers around the world. Providing the technology behind a range of VR and AR headsets across the market means Qualcomm is an easy pick for any VR investor.
Nvidia Corp. (NVDA)
Stunning, realistic graphics are essential to the VR experience — that’s where Nvidia comes in, providing the graphics processing units, or GPUs, that developers need to bring virtual worlds to life, as well as drivers that can be used with all the major headset brands including the Oculus, the Valve Index and the HTC Vive. While Nvidia’s bread and butter remains semiconductors and graphics cards, it’s clear that the company is taking a hard look at the future of virtual reality. Its VRWorks suite helps developers build virtual reality applications, and while the company didn’t break out any specifics in its latest earnings report, VR was mentioned as a growth driver for both Nvidia’s gaming division and its professional visualization division. Like Qualcomm, Nvidia’s technology is prevalent across the VR industry, making this company an excellent all-around VR investment.
Bringing VR to the consumer market is the key to this technology finally taking off. But it has also proven to be incredibly difficult. Snap learned that the hard way with the short-lived Snapchat Spectacles, the company’s attempt at AR smart glasses from way back in 2016. In the years since, Snap has taken a different route — with silly filters, colorful creations and an intuitive interface, the company has made AR technology fun and easy to use. The Snapchat app has put augmented reality into the hands of anyone with a smartphone, expanding its reach to 249 million daily active users in the third quarter. Snap made it easy for people to stay in communication with loved ones from home this year, and considering that the average number of Snaps created every day grew 25% year over year in the third quarter, the company is clearly on to something.
Top eight VR stocks to watch in 2021:
— Facebook (FB)
— Sony Corp. (SNE)
— Microsoft Corp. (MSFT)
— Apple (AAPL)
— Qualcomm (QCOM)
— Nvidia Corp. (NVDA)
— Snap (SNAP)
More from U.S. News
Update 01/21/21: This story was published at an earlier date and has been updated with new information.