By Reid Menge, Co-Portfolio Manager of the BlackRock Technology Opportunities Fund and
John Rose, Senior Manager, Business Intelligence at Ausiex
The Metaverse might still sound like science fiction but companies are building it now, and the investment opportunities are being seized on.
It’s been a rocky start to the year for tech investors but there is one part of the market that’s been steadily growing and it’s that place you’ve heard about but are still a bit unsure of: the Metaverse.
The term Metaverse pops up a lot, especially since Facebook reinvented itself last year as Meta. What it means broadly is the future of the internet or the coming shift in how we interact with technology. And this is a key fact – the Metaverse doesn’t exist yet, but it is being built.
According to Bloomberg, the Metaverse currently under construction is a virtual universe that blends aspects of digital technologies including video conferencing, gaming, cryptocurrencies and digital finance, email, virtual reality, social media and live streaming. Bloomberg Intelligence estimates that the global market size for the Metaverse could reach US$800bn by 2024.
No one knows how exactly the Metaverse will end up working but what is making people more convinced that it will emerge is that the next-generation hardware and the growth in computing power make it possible. And there is a growing view that the COVID-19 crisis has accelerated a huge shift to digital lives, with people more comfortable about working, shopping and socialising at home.
There is also an emerging sense that cryptocurrencies could allow transactions to take place seamlessly and globally in the Metaverse.
“The Metaverse may not be mainstream until later this decade, but investment opportunities are available now,” said Reid Menge, Co-Portfolio Manager of the BlackRock Technology Opportunities Fund.
While much of the investing in the Metaverse is by the big-name tech companies like Microsoft, Google, Meta Platforms Inc (Facebook), Roblox Corp and Nvidia, in Australia the focus is on smaller niche players developing the technologies that might be central components of this expanse in the future.
Artificial Intelligence focus
In particular, what has emerged is that Australia it is home to a number of Artificial Intelligence companies which are developing or providing key tools for the Metaverse and are already generating revenues.
There are 11 companies AUSIEX identifies as AI companies on the ASX. These are led by language technology provider Appen (ASX:APX), which provides or improves data used for the development of machine learning and artificial intelligence products.
Neural computing technology solutions firm Brainchip Holdings (ASX:BRN), the world’s first and only commercial producer of neuromorphic artificial intelligence chips, is also very prominent as it’s been on a share price rollercoaster this year.
Among the other interesting players are Livetiles Ltd (ASX:LVT), which focuses on workplace collaboration technology, aiming to keep people engaged with the company during the pandemic and reduce staff losses.
Bigtincan Holdings (ASX:BTH), is also popular with investors for its AI-software that allows automation of a company’s sales platform, enabling organisations and their employees to engage with customers better around the world.
Another company attracting interest is cloud-based call recording software-as-service provider Dubber Corp Ltd (ASX:DUB). It reported last month a 98 percent rise in revenue over the previous comparable period and announced an agreement with British Telecom.
Strong investor interest
Investor interest in all 11 companies has grown very strongly. AUSIEX found that since January 1, 2019, it has seen about $1.5 billion in traded value on these 11 AI stocks. In 2021, there were almost 40,000 individual trades on these shares, worth about $550 million.
“By the end of February, we expect to have traded around $240 million in these 11 companies in 2022. To put that in context of previous years – it is around half of what we executed in all of 2021 and more than double the volume of traded value done in all of 2019,” said John Rose, Senior Manager – Business Intelligence for AUSIEX.
Bumper start to 2022
Rose said in the first six weeks of 2022 retail and advised investors had been trading these AI stocks so heavily that several have appeared in the AUSIEX Top 50 Stocks list. At the end January 2022, Brainchip was the Number 1 traded stock across the AUSIEX ASX platform (currently third most popular at time of writing) and has been in the AUSIEX Top 10 for 7 consecutive weeks.
“It’s virtually unheard of for a small-cap AI technology company to rank as our Number 1 most traded stock on our platform where many investors are trading your normal blue-chip stocks,” Rose said. “In 2021 the coveted Number 1 spot was really only held by the likes of BHP (ASX:BHP) , Fortescue Metals Group (ASX:FMG), Zip Co (ASX:Z1P) and major banks likes Commonwealth (ASX:CBA) and Westpac (ASX:WBC). The last time an “outsider” stock was top of the charts was in March 2021 when Airtasker (ASX:ART) went public.
“Interestingly among the profile of investors trading on these AI stocks a lot of it is retail and, in this space, it’s the Gen X investors, those between the age of 40 and 56, who are really driving this activity,” he said.
Older investors rule
Of all AI trades on AUSIEX in retail, 40 percent is by Gen X investors, while “boomers” accounted for 36 percent of all trades on our platform. Boomers are those investors born before January 1,1965.
“Less than one in four of these retail trades was done by a Millennial or a Gen Z investor – those born after January 1, 1981 – which is slightly below the profile of investors on the AUSIEX platform,” Rose said. Millennial and Gen Z investors make up to about 26 percent of the overall retail book.
“The trade is really being driven by older investors. Among our younger clients we see heavier trading in BNPL firms, traditional ASX Top 20 stocks and ETFs (Exchange Traded Funds).”
“I wonder if older clients have moved into a stock-picker strategy – where they can add these stocks to supplement their existing portfolios,” he added.
For those more interested in taking the ETF route there are products out there though they tend to focus on distinct aspects of the emerging Metaverse.
Betashares Video Games and Esports ETF (ASX:GAME) focuses on the fast- growing video games sector, while the BetaShares Crypto Innovators ETF (ASX:CRYP) aims to track the performance of an index that provides exposure to global companies at the forefront of the dynamic crypto economy.
CRYP, when it launched in November 2021, broke records for the Largest ETF launch at AUSIEX where hundreds of clients, both advised and retail, took up positions on day 1, far in excess of any other ETF Launch before or since.
So, it seems that the recent market volatility in the technology sector, linked to fears over the impact of high interest rates on corporate profitability, may not have distracted all investors from the long-term potential embedded in the innovative tech companies that are shaping the future.
Top 11 AUSIEX traded AI stocks
|Stock Codes||% of Trades||% of Traded Value $|
This article was first published on the Ausiex AXIS website. This article is general information and does not consider the circumstances of any investor or constitute advice. No fund or stock mentioned in this article constitutes an offer or inducement to enter into any investment activity. Material published in SAFAA Newsroom is copyright and may not be reproduced without permission. Any requests for reproduction will be referred to the contributor for permission.