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Is Nvidia Building The Metaverse?

Bullish calls on Nvidia and the metaverse sent shares skyrocketing 12%, making it the 7th largest U.S. company by market capitalization

I know, I know, it’s all getting to be a bit much with this metaverse stuff, but one more time for the people in the back; I’ll at least try my best to sum it up in plain English though. The metaverse, very simply put, is the building of virtual worlds that are all connected. Nvidia’s (NASDAQ: NVDA) rise comes off the back of a bullish call from analysts saying it will be the next trillion-dollar company. So is it just another fad or could the metaverse be the real deal?

The long and the short of it

Well, according to some researchers the metaverse market was already worth $47 billion in 2020, but wait for it — they now expect it to grow at a 43% compound annual growth rate (CAGR) until 2028 for a total market value of $829 billion! So what does Nvidia do and how does it tie in with this?

What does Nvidia do?

Nvidia is most well known for gaming and its graphic processing units (GPUs) but is classified as a semiconductor company i.e. a chipmaker. GPUs accelerate computer graphics and are used in mobiles, PCs, and gaming consoles.

Founder and CEO Jensen Huang has built the entire fabric of Nvidia on GPUs since 1999, and it’s paid off, considering Nvidia shares are up over 72,000% since it debuted on public markets. While GPUs are at the core of its business, Nvidia operates in several markets; gaming, data centers, AI & machine learning, and professional visualization in particular, as well as medical imaging, autonomous driving, and smart cities outside of core operations.

Although its metaverse contribution will be powered by all sectors, professional visualization is at the forefront, where developers, engineers, creators, and designers will all be able to collaborate on projects together. This will be delivered through the Nvidia Omniverse.

Omniverse, metaverse, how many more verses are there!? 

Well, Nvidia Omniverse is its own platform, which intends to provide users with the tools to build out potential projects and simulations, create digital buildings, 3D models, render image design, and support collaboration in a virtual environment. For example, BMW uses the omniverse to simulate one-for-one digital factories, so it can test out new workflows and see how it affects, or can potentially improve operational efficiencies. Since its launch in December 2020, over 50,000 creators from 500 companies have begun testing the platform. 

Is Nvidia a good investment opportunity then?

Right now, Nvidia shares are up based on positive sentiment. While it could well become a core player in the space, we are yet to see any material results from its involvement with the metaverse. At a trailing twelve-month price-to-earnings (P/E) ratio of 106, it far exceeds the industry average which is in the low-30’s, which looks expensive. Nvidia is an industry leader with some distinct competitive advantages, but it’s still very early days to say who will prosper.

We will likely get a better idea of Nvidia’s plans on November 17, 2021, when it reports earnings and gives guidance. We will be able to see then whether or not the company has seen growth in the visualization segment, and what its future outlook for its omniverse platform will be. 

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