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METV ETF – Big Technology Needs Metaverse (NYSEARCA:METV)

Вход в Метавселенную

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The main word for the end of 2021 was “metaverse”. From social networks to the biggest game publishers, giant companies are completely changing their development strategies to enter the early stages of the trend, renaming their most important products and themselves.

Facebook became Meta Platforms (Facebook) and the Oculus Quest VR (virtual reality) headset became Meta Quest. Game publishers Ubisoft (OTCPK:UBSFY) and Square Enix (OTCPK:SQNNY) set goals for 2022 and clash with opponents to create their own metaverse. Even Microsoft (MSFT), the press release of the biggest deal in recent years, the acquisition of Activision (ATVI), mentions the metaverse.

Roundhill Ball Metaverse ETF (NYSEARCA:NYSEARCA:METV), is a fund with $528 million in assets under management (AUM) and 45 holdings in the portfolio. The fund tracks the Ball metaverse Index. It primarily includes large-scale US technology companies. The METV ETF is currently the only complete metadata warehouse ETF available.

dividends reinvestment
Assets under management $528 million
expense ratio 0.59%

I think the bet on the metaverse will eventually pay off. I think so because Big Tech companies are very interested in building the metadata warehouse and attracting users to it. The trend has already been set and I believe Big Tech will be successful in creating new high margin market. Metaverse success basically means that tech companies will become much stronger and stocks will reflect that.

Big tech and the metaverse

2021 has been the year of IT companies. Global spending on IT increased YY 9.5% and reached 4.2 trillion dollars. 2022 and 2023 are expected to be a little more challenging for IT companies, with a CAGR of only 5.5%.

Yet Big Tech is on another planet. Combined revenue of Big Five tech companies in 2021 reached $1.4 trillion, up almost 30% annually. Even considering that companies could spend trillions of dollars on digitalization in the next five years, digital transformation alone will not be able to sustain such high growth rates in the long run. Big technologies need the next big market that can feed them, and it has to be a high margin market. It’s time to move not just programs and data to the cloud, but to the entire physical world in general. To solve this problem, where the virtual world will become the center of concentration of everything, the metaverse is summoned.

Metaverse is the culmination of a long game of mergers of companies, the consolidation of content markets. By letting the consumer in, the Metaverse can generate maximum revenue through dozens of individual intellectual property, crossover, and multiverse from a wide variety of domains.

As many brands now associate themselves with the metadata store and even more brands plan to venture into the virtual world in the coming years, I expect metadata will eventually materialize as large-scale ecosystems turn to multiple major technologies. They have the financial capacity to invest in cutting-edge technologies and will be able to profit from the metaverse through competitive advantages and economies of scale.

metaverse players

METV has major stakes in several companies that are making strides towards metadata: Meta Platforms, Roblox (RBLX), Nvidia (NVDA) and Microsoft.

Since Metaverse is not just a video game or 3D modeling in XR-space, but a set of scenarios and applications focused on entertainment and communication, it is clear that no one can create such a digital space alone. Each player is still trying to close the “future of the Internet” on himself. Big Tech companies today say that any brand and company will join the metaverse, but they also say their platform will be built upon.

Among the key players in the emerging metaverse, METV lists virtual reality/augmented reality chip and headset manufacturers, game industry and 3D content developers, cloud platforms and cloud service providers, network infrastructure providers, etc. All of them will certainly contribute to some degree to the creation of virtual worlds.

Facebook (Meta) It is one of the key players in the development of VR and AR (augmented reality) technologies. The first devices created were VR headsets and related accessories manufactured under the Oculus brand, designed for video games. The high quality of the devices is attracting many gamers, and the company is currently entering the monetization phase for Oculus headphones. Only in 2021 the company investment $10 billion in projects related to Metaverse, and more than 20,000 employees are already working on the development of the VR and AR devices necessary to create it.

Meta is more likely to be the first single operator of the future metaverse. This is why Meta is the largest holding in METV with a weight of 9.6%.

fb stock performance

chart by author

roblox It is one of the most popular gaming platforms in the world. Roblox intuitively started working on the metaverse model long before it became fashionable. Roblox is extremely popular with a young audience: more than half of teens in the US use the service. Since the content that developers create on the platform goes beyond the video games we are already used to, Roblox is calling it now “experiences”. Users can also create digital items that can be exchanged for virtual or real currency. Roblox is not just a standalone game. It uses third-party developers to create new content for its users. Roblox’s metaverse foundation is already here, and the company continues to make it even more sustainable.

Roblox is the second largest company in the METV ETF. Its unique position in the gaming market, which will surely evolve into something bigger, makes it a promising metaverse company. Roblox accounts for 7.48% of the portfolio.

RBLX stock performance

chart by author

Microsoft hopes to be the link for virtual worlds. In 2021, the company announced network platform for mixed reality interaction and user experience. Mesh will soon be integrated into Microsoft Teams collaboration space, Azure and Dynamics 365 cloud services, and enterprise event space, respectively. Then Mesh will be the basis for the creation of an ecosystem of new applications and will be available on various devices from any manufacturer. Microsoft also considers the Azure for Business cloud service to be suitable for metadata storage.

Microsoft, as a leading software provider, could become a major metadata warehouse company due to its enormous size. MSFT is the third largest company in the ETF with a weight of 7.26%. Big bet for big company.

MSFT stock performance

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Nvidia graphics processing units (GPUs) dominate in many ways, making the company a major player in metadata storage. Nvidia focuses not only on improving the performance of the GPU, but also on the introduction of new technologies. In 2021, Nvidia introduced the Omniverse platform for collaborative 3D design and real-time 3D modeling. The Omniverse platform can be used in a variety of applications, from creating video games and sandboxes to modeling digital twins. Thanks to Omniverse, BMW, Ericsson, Siemens Energy and Lockheed Martin already have digital twins.

Nvidia will play an important role in the metaverse. The company will likely use its platform as a necessary foundation for the future world. The main advantage of this strategy is that it will be a complete B2B, so it does not need to attract everyday users to it. Metadata storage will lead to advanced hardware devices, including those that will take consumer and industrial electronics capabilities to a whole new level. This will greatly increase the demand for Nvidia products. The company is the main beneficiary of the metaverse-rushers CapEx boost. Nvidia’s share of the portfolio is 7.23%, making it the fourth largest holding in METV.

NVDA stock performance

chart by author

These four companies make up 31.57% of all holdings. While it’s hard to predict which companies will succeed in the Metaverse, I like that METV is betting on companies that are closer to the future than anyone else.

Yield

METV launched on June 30, 2021 and has since dropped more than 45%. This was due to the general market environment as the growth-to-value return began.

METV ETF and NASDAQ composite performance

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Solution

METV looks like an interesting ETF for long-term investment. Big Tech needs a new market to maintain its high growth rates. METV includes promising companies that are currently heavily investing in the metadatabase.

Estimates of the global metadata warehouse market vary considerably as it is currently difficult to describe and quantify all components of this industry. Still, everyone agrees that the metaverse market will grow rapidly over the next decade. Fortune Business Insights predicts a 47.6% CAGR for the industry.

metaverse market projection

wealthbusinessinsights.com

METV has many large companies affiliated with its metadatabase. I think this ETF is a good Buy and Hold as I believe the Metaverse will be a big market in the future.

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