The top semiconductor companies Advanced Micro Devices and Nvidia are already being heavily used by metaverse creators for their hardware needs. Here is why that business space could be huge in the future.
1. The case for Nvidia
Nvidia creates state-of-the-art graphics cards for a wide range of purposes, such as gaming, robotics, data centers, as well as the company’s professional-visualization space, which is home to Nvidia’s Omniverse project. Nvidia’s Omniverse project is its virtual-world simulation and real-time 3D collaboration platform, available to the creators using the RTX graphics chips.
It can be used to create games or any other application involving virtual environments, including the metaverse, and over 100,000 developers are leveraging the graphic cards capabilities. From a financial perspective, the company’s professional-visualization section has made up just 7.8% of its $26.9 billion in total revenue in fiscal year 2022, but it was the quickest growing by far with an increase of 100% in revenue.
Beyond the Omniverse project, the company is already making graphics chips that can be compatible with most top virtual-reality headsets, which includes the Oculus brand, and is owned by the social-media giant Meta Platforms — the main creator of the metaverse.
Nvidia has a record year in 2022 from both a profitability and revenue standpoint. Its $26.9 billion in revenue has represented 61% growth when compared to fiscal year 2021, and its $4.44 in adjusted earnings each share increased 78%. This growth run is set to continue into fiscal year 2023 with analysts expecting $34 billion in revenue and around $5.55 in expected earnings.
As an investment, this Nvidia stock is a great way to add parts of the metaverse to your portfolio because it comes with many well-established, high-growth segments attached.
2. The case for Advanced Micro Devices
AMD is one of the most popular producers of semiconductors around the world and has a portfolio of huge deals. Its chips power many popular gaming consoles such as Microsoft’s Xbox and Sony’s PlayStation. Top EV maker Tesla has also selected AMD chips to run its infotainment systems in several of its cars.
2021 was a huge year for AMD. The company’s gross profit margin skyrocketed to 48% from 45% during 2020, and that has helped adjusted earnings for each share see growth of 116% to $2.79. And that has come on the back of a 68% boost in revenue up to $16.4 billion. AMD attributed its performance to increased sales of its products that have a higher-margin, but the pandemic-driven chip shortage issues have also given most semiconductor manufacturers the ability to raise prices throughout the year.
Analysts expect another show of strength this year with up to $25.5 billion in expected revenue and $3.99 in earnings potential. Given AMD’s growth rates, it is easy to say that AMD deserves a large premium, so the stock seems attractive even at its current price.