The virtual decline of the virtual world

When I commented on the growth of the stock indices of the so called ‘metaverse companies’ in the media in December 2022, the article was entitled ‘The more virtual reality, the greater drop in value’. However, I ended the article by stating that the ‘bursting of a bubble’ does not correlate with the unstoppable long-term trend. Little did I know at the time that the turn of the year would prove to be so true.

Indeed, 2022 was not a generous year for the ‘metaverse creators’ such as gaming giant Roblox or NVIDIA, a leader in artificial intelligence computing. Their value dropped significantly compared to the decline in technology industry as a whole.[1]

While the NASDAQ index dropped in almost 34% last year[2], the shares of the above companies fell by 73% and 50% respectively.[3]Furthermore, cryptocurrency companies have been hit the hardest. Coinbase, which is part of our Metaverse Index, fell by 86%.The fall of the FTX exchange was the most significant, although the fall was mostly related to series of personal failures and reflects the general fear in the technology asset market.

The fear of disappearance is best illustrated by a comparison of four major players in the metaverse - Microsoft, Amazon, Alphabet and Meta Platform. Zuckerberg's operator of Facebook, Instagram and other social media has seen the biggest drop in share value of the above. Its share price has fallen by almost two-thirds in the last year, reflecting the high level of investment in the creation of the metaverse. The company's decision to continue investing in its Reality Labs division was bad news for investors. Accounting for 20% of the company's expenses, it represents a cost rather than a revenue item.

But does a bad year mean a slowdown or a halt for virtual reality? Let me remind you of the dotcom bubble in the 2000s. At the time, many experts predicted a halt in the progress of e-shops, or even a dead end in the development of retail. Today, we see it as a logical correction of a precipitous development. E-shops now account for a few tens of per cent of total retail sales, and their share is gradually increasing, regardless of ‘inflating and deflating any bubbles’.

If you find the topic interesting, see the Metaverse Index.

Olívia Lacenová

Main analyst Wonderinterest Trading Ltd.

 

*Past performance is no guarantee of future results.

[1] Roblox stock value

2 NVIDIA stock value

 

[3]https://www.google.com/search?q=nasdaq+index+graf&oq=nasdaq+inde&aqs=chrome.2.69i57j0i433i512j0i512l8.5639j1j7&sourceid=chrome&ie=UTF-8

The comparison of the stock value from 3/1/2022 to 23/12/2022

 

This text constitutes marketing communication. It is not any form of investment advice or investment research or an offer for any transactions in financial instrument. Its content does not take into consideration individual circumstances of the readers, their experience or financial situation. The past performance is not a guarantee or prediction of future results.

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