Virtual Reality: How to Win from the Emerging Technology Growth

As the world of digitalism is going further, the personal experience technologies are getting more and more attention from the leading market players. One of the leading technologies on this side is virtual or augmented reality (VR/AR).

Why may it be considered as a commercial breakthrough in the next couple of years? Firstly, we already can see the first successful products: VR platform as well as content. And still, more and more content is being created every day: 360 videos, games, movies and lot of other stuff. The second point is that such market players as Google, Facebook and Intel already have the departments that deal with VR, mainly acquiring the “stars” appearing at the new business skies of VR market. Only Facebook itself absorbed 11 different startups working in the sphere with the M&A volume exceeding USD 2 bln. And the last, let’s take a brief look at the figures. Worldwide revenues for the augmented reality and virtual reality market are projected to approach $14 billion in 2017, some clever people say. But that’s forecast to upgrade to $143 billion by 2020.

Headsets are likely to be the primary way people experience virtual reality, but sales have been relatively modest, due to the expense of the PCs needed to support the headsets. Now, companies are working on headsets that do not need to be attached to PCs, which should help spur the growth of the industry, leading to consolidation.

Naturally, for you, as an individual investor, there are no M&A options on the market, but still, on the stock market there are plenty of variants. The majority of the VR-developing companies are public, so it creates a huge field for investments. We can split the companies working on the VR market into 3 categories: end hardware makers, chip and software providers and companies actively implementing VR into their operations.

For the first group, everything is obvious: huge innovative companies have captured the lead in the production of headsets. Google, Microsoft, Facebook, Samsung, Sony, and HTC are successfully developing their own virtual reality hardware. And not only hardware, they also generate a huge content for it. Just a small eloquent fact: in Facebook post priority algorithm 360 videos and photos are at the first place to appear in your feed.

The second group of chip and software providers includes such huge players as Intel, NVIDIA, Immersion Corp, and Qualcomm. Among smaller players – Himax and Ambarella. In most cases, sales of VR chips are small and don’t show up on these company’s radar as of yet, but if the industry takes off it could help them drive incremental growth.

The third group is broad as in the nearest future 360 content will be dominating in a large variety of entertainment platforms. This is the mass market, but VR will definitely find its niche on the market of military orders, training centers and other facilities that are in need of high-level simulation. As for now, the most interesting technology implementer is IMAX that can take the cinema-going experience to the whole new level (naturally increasing profits and share prices).

To sum up, the leading VR developing companies are majorly technological giants, where VR doesn’t capture the significant share right now. The key message in the previous sentence is “right now” as the market is steadily developing and very soon we will probably see the VR boom. The only company in which VR is considered as a significant area of activity is Facebook with its Oculus Rift. I think that investment in VR-developing companies is a long-term investment which can bring a sufficient yield only in 2-3 years. Reed more.

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