There is a ton of buzz around the so-called metaverse. Plenty of US stocks are being touted as metaverse winners. But are there any potential UK metaverse stocks that I could add to my Stocks and Shares ISA? First, I need to work out what the metaverse is.
What is the metaverse?
The metaverse truly entered the public consciousness when rumours — later proven true — of Facebook rebranding itself as Meta started to circulate. The buzz around the metaverse only got louder when Mark Zuckerberg discussed it and his company’s role in it at length during the Facebook rebranding announcement.
So, what is the metaverse? Rather than cobbling something together myself, Investopedia defines the metaverse as: “a digital reality that combines aspects of social media, online gaming, augmented reality (AR), virtual reality (VR), and cryptocurrencies to allow users to interact virtually.”
The metaverse, we are led to believe, will merge the physical and digital worlds. There will be online spaces in which people will immerse themselves rather than just view content. A good example might be the digital concerts that have happened on the Roblox platform, and indeed Roblox is an excellent example of a US metaverse stock.
Are there any UK metaverse stocks?
But I want to know if there are any UK metaverse stocks that I might want to buy. To make the search more manageable, I will break the potential players into three broad groups:
- Software – developers and platforms
- Carriers – cables and airwaves
- Hardware – chips, consoles, and handsets
The obvious place to look for UK metaverse stocks is in the software space. These are the platform developers. The platforms are the portals through which people will access the metaverse. Although not as plentiful or obvious as their US counterparts, I think I have uncovered some UK stocks for getting exposure to the metaverse.
5G, full-fibre, and semiconductors
The metaverse will need speedy 5G and full-fibre connections to deliver its full potential. So, companies like mobile and broadband operator’s Vodafone and BT Group are worth considering as UK metaverse stocks. Spirent Communications tests 5G and broadband connections and devices and might see a lot more work come its way if the metaverse takes off.
Consoles, smartphones, and other devices will allow platform access and house peripherals like cameras and microphones and screens to interact with the metaverse through the platforms. Again the UK markets are lacking here. But all the devices rely on semiconductors, mainly in their CPUs and GPUs, to function.
IQE is a UK-listed company that supplies compound semiconductor wafers and has just signed a long-term strategic partnership with GlobalFoundaries, the fourth-largest semiconductor manufacturer. The partnership aims to develop “gallium nitride on silicon (GaN on Si) technologies for mobile and wireless infrastructure applications“. GaN on Si is the material of choice for 5G networks according to IQE, and there is support for further demand growth as the technology matures and evolves. IQE has been loss-making for a couple of years. Although the losses are narrowing, the company struggles with sub-20% gross margins in an industry that averages 25%–50%.
I have not made up my mind to buy any of the potential UK metaverse stocks mentioned. I need to do a bit more digging into the companies first, to see if they could take off if the metaverse does.
One last thought. If the metaverse does take off and people are spending increasing amounts of time online, and sharing more of their personal information across the digital space then cybersecurity will be more important than ever…
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James J. McCombie does not own any of the shares mentioned in this article. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
