The driver of the index was primarily the shares of the technology company Nvidia. Since the beginning of this year, Nvidia has increased its value by far the most of all the titles included in the Metaverse Index - specifically by 95.75 percent. Also in year-on-year terms, the performance of this title is impressive: +252.1 percent.* Although Coinbase surpassed Nvidia in year-on-year growth, Nvidia has the second highest weight in the Metaverse Index (after Microsoft).

The unexpected benefit of covid

However, the companies included in the Metaverse Index have not always had a bed of roses in the last five years. The big unknown was the covid crisis, which introduced a huge amount of uncertainty to the global economy. At first, it was not clear which companies, and therefore sectors, would be among the losers and which, on the contrary, would be among the winners. One could understandably guess that good times are coming for the pharmaceutical industry, as the demand for a vaccine that could build an effective dam against the covid pandemic has grown enormously.

But it soon became clear that one of the winners of the covid crisis would be technology companies. Entire sectors in the individual economies of the world found themselves in the so-called "home office" during the covid crisis, as governments gradually and alternately restricted their operations. Thus, the demand for solutions that would make it possible to work remotely has grown enormously. Where it was possible, technology companies offered such a solution.

The rise of AI

And so it became clear that services, education or administration in particular can function in this mode thanks to technology. While the manufacturing industry was going through a tough time, technology was growing dramatically.And with that, the pressure increased for the offered solutions to be more and more perfect and to allow their users to remain in "remote" mode to some extent even after the end of the covid pandemic.

It can be said that one of the consequences was also the rise of artificial intelligence (AI - Artificial Intelligence), which has experienced an incredible rise in the last tens of months. Routine work in various fields is (and will certainly be) replaced by assistants in the form of various AI tools. It thus becomes a breeding ground for the metaverse, i.e. the virtual twin of our real world, which it competes with more and more efficiently in many areas. This in itself creates a favorable environment for the above-average rapid development of technology companies.

The Nvidia Phenomenon

The success of metaverse companies is well illustrated by the story of Nvidia. Its market capitalization is already 2.36 trillion dollars. This puts Nvidia in third place in the global ranking, which is led by Microsoft ($3.2 trillion) and currently in second place is Apple ($2.7 trillion).*

Source: Google*

What is behind Nvidia's success? According to Wonderinterest Trading analysts, it is clearly the rapid development of artificial intelligence. Without the chips that Nvidia supplies to the market, such AI development would not actually be possible.

Chips from the Nvidia workshop are capable of transferring a huge amount of data and are able to process it incredibly quickly. In other words, companies that want to offer quality services based on artificial intelligence in the market cannot do without Nvidia products. That is, if they themselves want to be successful.

The current boom is just the beginning

It is believed that the current boom is still just the beginning. Gartner, a technology research company, estimates that global spending on artificial intelligence and related software will rise from $124 billion the year before to nearly $300 billion in 2027.[1] Thus, global spending on AI is expected to more than double within five years. [1]

From this point of view, Nvidia seems to have golden times ahead for at least the next few years. But on the other hand, it must be taken into account that the growth of any market attracts competitors to enter it. So the question is, how unique are Nvidia's products to be able to withstand the competitive pressure for a while longer.

However, no matter how competition develops in the chip market, current developments show that technology companies will continue to be among the drivers of the global economy. Technologies that serve the world of virtual currencies will probably be added to them, as demand from both consumers and companies can be expected to grow here as well.

OIívia Lacenová, chief analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results.

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.theguardian.com/technology/2024/feb/23/why-has-nvidia-driven-stock-markets-to-record-highs