Debunking the 'Death' of Metaverse: The Dust Has Settled, Here's What Still Stands
The trough may have arrived as Apple VR and Meta Quest3 coming up
As Nvidia delivered outstanding financial results that made itself into the club of a 1 trillion-dollar market cap and the world amazed by the powerful functions of Chat GPT-4, the metaverse is like a forsaken star that's rumored to be dead. In our view, it’s around the time that metaverse companies deserve a further look as Apple going to launch to new VR headset on June-5, and major stocks in the field have fallen nearly 90% since ATH. We also believe the full potential of AI has just started, which will further empower metaverse companies to face industry challenges.
The “death” of metaverse: Attention shifted to artificial intelligence
In the mid of 2021, metaverse became the most discussed “next big thing” among investors, founders, and mass media. Back then, the COVID-19 epidemic forced people to stay at home which made people realize the possibility of a virtual future. Accompanied with the new VR headset launched by Meta, the heat of metaverse further peaked as Facebook changed its name to Meta, further confirming the trend.
However, although the rise of metaverse is a long-term thesis, the market sentiment has cooled off as big companies slowed down or even scaled off their metaverse strategy and launched more endeavors in AI-based applications and language models. As if overnight, metaverse has lost its shrine as “the next big thing” and become another bubble driven by futurists’ enthusiasm.
A good way to put the “bubble” (in the eyes of the mass market) that has burst in perspective is to check out the drastic decline of capital markets. The stock price of Unity and Roblox, which are the leading companies related to metaverse, has declined 85% and 83% from its all-time high in 2021 to the latest 52-week low stock price. For small-cap companies in the metaverse sector like Matterless, which offers 3D scanning and visualization solutions for the built world, has declined 93% since the peak in 2021.
What remained after the party is over: Yes, AI is in the picture
However, our thesis on the long-term value of metaverse remained unchanged, mainly because
The growth of metaverse users and hours engaged is still continuing, especially among kids & teenagers. Roblox’s DAUs in 2023Q1 have reached 66.2 million, up 26% yoy with hours engaged up 26%. While Roblox’s growth rate is mainly driven by the over-13-year-old category, it’s worth noting that Roblox is dominated by young users with 67% of users under the age of 16 and only 14% of Roblox's users over 25 years old.
Companies are still revamping and launching improved XR/VR headsets. While it’s expected that the upcoming Apple VR headset will cost as high as US$3000, we believe over time companies will improve user experience and drive entry costs lower as Meta Quest 3 comes out at lower price points at US$499.99 in Fall 2023.
Metaverse and tech/AI companies create demand for each other. Companies enabling users to create metaverse content like Unity and Adobe have integrated AI for easier user experience. In return, the growing consumer demand will eventually affect the orders of AI chip companies like Nvidia. Beyond the consumer sector, Nvidia’s own Omniverse platform is designed for industrial metaverse applications that will work heavily with software design companies. For how AI can facilitate the metaverse industry in general, you can also check our previous article “AI in the Metaverse”.
“Within Unity, we can train (AI) algorithms for full 3D worlds, and the underlying instructions that create these worlds, in real-time…… Through this training, we can create ever richer services built on top of Unity and can provide extraordinary capabilities to our partners to leverage Unity as a data creation, simulation, and training engine for their own needs.” — Unity 2023Q1 Shareholder letter