Metaverse Stocks To Buy: 12 Best Hardware And Semiconductor Stocks – Business Insider

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The hardware needed to build the metaverse will bring some companies big profits.
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  • Credit Suisse expects the metaverse to “bring profound changes” to today’s technology and media.
  • Hardware and semiconductor firms will profit as better VR and AR devices hit the market.
  • Manish Nigam, the bank’s head of global sector research, shared his top twelve stock picks.

Since Facebook’s rebrand to Meta last October, many investors have turned their attention to the metaverse and the potential profits to be made there.

But the so-called “crypto winter” of the past few months — which has seen major tokens like bitcoin and ether plummet almost 50% from their November highs — has raised some concerns. Likewise, investors weren’t exactly assuaged by the dramatic 25% nosedive in Meta shares last week, when the firm announced that its metaverse business had lost $10 billion in the fourth quarter of 2021.

Still, recent issues haven’t stopped corporations and investors alike from pouring billions of dollars into the metaverse. And considering the gargantuan amount of investment and hype surrounding this burgeoning field, one thing feels certain — like it or not, the era of the metaverse is coming.

A team of Credit Suisse analysts, led by Global Sector Research Head Manish Nigam, agree.

“The metaverse should eventually bring profound changes to the entire technology, media, and telecom sector,” wrote Nigam in a February 8 note, before providing the caveat: “Perhaps none as soon or as extensive as in consumer electronics.”

On a wider level, Nigam and his team divided the sectors that will be most effected by the rise of the metaverse into three major categories, with the first focusing on content creation companies. The second of the three categories is hardware and semiconductor firms, including the components, assembly, and display subsectors.

“For semiconductors, the metaverse fits into our data paradigm thesis, with the metaverse permeating the create/capture, store, transmit and analyze view of the data economy and poised to benefit as improvement in power/performance unleashes more data consumption and use cases for silicon,” said Nigam. “For hardware, the metaverse would drive augmented reality/virtual reality opportunities in assembly, display, camera/optics, PCB/substrate, MLCC, connectors and batteries.”

Surging semiconductors

The major problem metaverse adoption is currently facing is finding equilibrium between improving the performance of computing power while decreasing the cost, wrote Nigam.

For instance, he estimated that to support a fully immersive metaverse setting in Fortnite, a 1,000x improvement in computing power is required. But with high-end gaming computers already easily costing well over $10,000 in some cases, corporations must find a way to keep costs down while accelerating user experience.

Central to this issue are semiconductor chips, which are included in thousands of consumer products, including computers and gaming consoles. Nigam called semiconductors “the most levered metaverse play,” noting that “semis are becoming the staples of the new data economy — albeit with higher growth, higher returns and yes, a higher level of cyclicality — but staples nonetheless.”

With or without the metaverse, semiconductors have become an increasingly important part of our daily lives. Since 1977, semiconductor chips per capita have ballooned from two to 146 — a magnitude of around 70x — thanks in large part to the proliferation of personal computers and mobile phones. And while semis have grown from 1% to around 3% of global market capitalization in recent years, Nigam still sees potential upside to around 8% by 2030.

semiconductor global market cap

Credit Suisse

“Given our view that the metaverse is a pervasive theme across our data paradigm, we would argue our entire universe would benefit, especially as the semi industry experiences accelerating growth from $554 billion in 2021 to $1 trillion by 2030,” wrote Nigam. “The sectors perhaps most levered to metaverse are likely to be: compute, memory, and connectivity.”

The hardware race

Major augmented reality (AR) and virtual reality (VR) platforms have already experienced “advancements in chipsets, display, optics, and tracking solutions to improve user experience,” Nigam said. He also noted that the weight of these devices have been noticeably declining through better design changes.

However, both platforms have still been unable to completely resolve their challenges.

For example, the fresnel lenses used in VR to provide better immersion introduce the problem of chromatic aberration, or color distortion, which designers have so far only been able to fix by adding in more lens elements — thereby making the devices heavier. And while new lens materials have been created, it will still take some time for them to reach commercialization, wrote Nigam.

On the flip side, the emphasis in AR is for users to observe an added layer of virtual integration on top of the real world, which requires optical combiners. But while several kinds of optics have been adopted in modern AR devices, each has its own drawbacks, like double images, distortion, higher costs, uncomfortableness, and lower image resolution. Overall, said Nigam, the industry is still exploring the best optimal solution for AR devices.

Finally, true immersion in the metaverse will require major innovations in display mechanisms, since metaverse displays require much more nearness to consumers’ eyes, as opposed to the distance of traditional screens. Besides this design challenge, displays will also need to adopt smaller sizes, lower power consumption, wider views, higher resolutions, refresh rates, and brightness levels for optimal performance, said Nigam.

With all of these innovations necessary for the metaverse to reach its full commercial potential, there are plenty of opportunities for well-positioned companies to profit. Below are 12 stocks that Nigam and his team recognized as their top picks in the hardware and semiconductor category. The stocks span four subsectors — assembly, display, passives, and semiconductor — and are listed below along with each company’s ticker, market capitalization, price target, and metaverse theme.

1. Goertek

stock graph


Ticker: 002241 CH

Market cap: $25 billion

Price target: ¥67.90

Subsector: Assembly

Theme: “Sole supplier for Meta and Sony, ARVR accounts for 20% of sales.” − Kyna Wong

Source: Credit Suisse

3. Novatek

stock graph


Ticker: 3034 TT

Market cap: $10 billion

Price target: NT$730

Subsector: Display

Theme: “Supplies high-end DDI for VR devices i.e. Oculus quest 2.” − Jerry Su

Source: Credit Suisse

4. Murata

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Ticker: 6981 JP

Market cap: $47 billion

Price target: ¥11,300

Subsector: Passives

Theme: “Supplier of passive components for ARVR.” − Akinori Kanemoto

Source: Credit Suisse

5. Nvidia

stock graph

Markets Insider

Ticker: NVDA

Market cap: $608 billion

Price target: $400

Subsector: Semiconductor

Theme: “Enables AI applications, compute TAM at 10-15% CAGR + Nvidia DCG to outgrow.” − John Pitzer

Source: Credit Suisse

6. Marvell

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Markets Insider

Ticker: MRVL

Market cap: $59 billion

Price target: $105

Subsector: Semiconductor

Theme: “Outsized exposures in 5G, datacenter, Cloud, and Accelerated compute.” − John Pitzer

Source: Credit Suisse

7. Intel

stock graph

Markets Insider

Ticker: INTC

Market cap: $195 billion

Price target: $70

Subsector: Semiconductor

Theme: “Stronger server demand and stable PC from WFH, SFH, online everything.” − John Pitzer

Source: Credit Suisse

8. Micron

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Markets Insider

Ticker: MU

Market cap: $91 billion

Price target: $130

Subsector: Semiconductor

Theme: “Memory content moving structurally higher.” − John Pitzer

Source: Credit Suisse


stock graph


Ticker: 2330 TT

Market cap: $593 billion

Price target: NT$800

Subsector: Semiconductor

Theme: “HPC (40% of sales), smartphone (40-45%), and IoT business to benefit.” − Randy Abrams

Source: Credit Suisse

10. Samsung

stock graph


Ticker: 005930 KS

Market cap: $369 billion

Price target: ₩115,000

Subsector: Display/Semiconductor

Theme: “Memory supplier to the infrastructure equipment.” − Keon Han

Source: Credit Suisse

11. Win Semi

stock graph


Ticker: 3105 TT

Market cap: $5 billion

Price target: NT$425

Subsector: Semiconductor

Theme: “Main VCSEL foundry for Lumentum, could supply into Apple Glass.” − Jerry Su

Source: Credit Suisse

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