When you think about the Metaverse, you're probably thinking that it's in the distant
future, slowly being built by some of the biggest corporations in the world.
Trillion-dollar companies with secret underground labs, researching all the
different ways they can make money off the internet and the people using it. Or maybe
you think the whole Metaverse thing is just some sort of gimmick; a scheme put together by video
game companies and the entertainment industry to pump up sales of virtual reality headsets
and the low-budget experiences they run. This episode isn't about Facebook or Meta, and it's
definitely not about Mark Zuckerburg's idea of, uh, whatever this is. [Tiger and the Buffalo Art]
I want to show you a different side of virtual reality. In this episode,
I'll show you the current state of the art tech
and some of the publicly traded companies using it to make the world a better place today,
including some that ARK Invest doesn't hold, at least not yet. Your time is valuable,
so let's get right into it, starting with the actual state of the art and how it got here.
You're probably already familiar with virtual reality, or VR, which requires a headset
device to immerse you in a completely virtual setting. And you're probably also familiar with
augmented reality, or AR, which overlays digital objects and information onto the
shared reality we call the physical world. That means you can use it with smartphones, tablets,
and even hands-free glasses. But there's another application called mixed reality - not AR, not VR,
but MR - where physical and digital objects and environments can co-exist and interact in
real-time. This isn't the distant future. It's the state of the art in engineering and design today,
from architecture to aerospace to automotive. All kinds of new products and services are made
possible by mixed-reality technologies. On the software side, mixed reality drastically increases
productivity and reduces time to value for one simple reason: people can create organically,
using their hands, instead of having to learn industry-specific software, tools, and processes.
Designers can swap parts and make adjustments to a model by interacting with it in mixed reality
and the modeling software translates and tracks those changes in the background. We'll get back
to these companies later in the episode. On the hardware side, full visual immersion has
already been reached, although it does have a pretty big catch: we're only
talking about objects that can be made to look photorealistic with industrial-grade software.
So we're not talking about giant robots or epic space battles, or even human faces just yet.
It's important to talk about VR headsets because nothing else really matters if you don't believe
they're getting close to being ready for prime time. They're actually a lot further
along than most people think. Heck, they're a lot further along than most experts think.
Here's what ARK Invest has to say about the state of virtual reality and visual immersion.
According to their 2021 Big Ideas Report, the best-in-class VR headsets today achieve only
10% of human visual immersion. If consumer VR is limited to the console gaming market,
ARK Invest believes that fully immersive VR headsets won't reach mass-market adoption
in the same way that cell phones have. And to reach that level of complete visual immersion at
a reasonable price, VR headsets basically need to follow the same adoption curve as the cell phone
for the next 10 years - from now, until 2030. Yikes! Well, let me show you that consumer VR
may not be limited to the console gaming market for too much longer. This is the Varjo XR headset.
It uses two 12 megapixel cameras to pass video of the real world into the headset displays.
It also has about the same color range as the real world, so photorealism isn't lost
thanks to off-colors or limited lighting and rendering capabilities. The Varjo XR
headset uses a built-in LIDAR to calculate the range of real objects in the environment
and decide how to scale the virtual objects in it, so there's no object jitter or flickering.
It has integrated hand and eye-tracking to keep interactions as natural and fluid as possible.
This blows the doors off industrial use-cases because you can bring physical objects into the
digital space. For example, pilots can bring real checklists to a flight simulator and use
their real hands to check things off as they go, as opposed to the VR controllers we're thinking of
for video games. Or, they can sit in a real cockpit but fly a simulated flight with the
aircraft turned completely off. Can you tell what part of this scene is fake? Well, it's actually
the entire scene. That's the power of mixed reality. And of course, that power can be used
to simulate computer monitors or screens of any size and shape. Think about all of the different
devices with screens you have today. Your phone, your TV, your laptop or desktop computer, maybe
an extra monitor or a tablet off to the side. Why not just digitally simulate whatever computer and
displays you want depending on the physical environment you're actually in at the time?
The possibilities are endless AND more convenient; after all, this headset is smaller than your
physical laptop. The only problem is... the Varjo XR-3 headset is almost $8000. [disc scratch] These
things are basically the Tesla Roadster of headsets. That's actually what stopped me
from making this episode sooner. ARK Invest is right; no one except the wealthiest enthusiasts
can afford these things right now, so they'll never reach mass-market adoption at this rate.
But, just like Tesla keeps innovating and has moved downmarket since the Roadster,
Varjo just released a $2000 dollar version of its headset, called the Aero. While the Aero strips
out a lot of the industrial-grade features like the pass-through cameras and the LIDAR, it doesn't
lose any of the VR functionality from Varjo's $8000 XR-3 headset. That means industrial-grade VR
is now available at around the same price point as a flagship smartphone and costs will only continue
to decline over time, just like Tesla's cars and personal computers and laptops and cell phones.
ThrillSeeker is a great YouTuber who focuses on all things virtual and augmented reality. Here
are some of his first impressions of the Varjo Aero VR headset. [ThrillSeeker Clips with Audio]
If you're interested in learning more about the state of the art of AR and VR, Thrill Seeker is
a great channel to follow. I'll leave a link to his deep dives on Varjo in the description below.
Hopefully, you're starting to see that the state-of-the-art for VR is being pushed forward by
industrial applications, not just video games, and amazing hardware is quickly coming down in cost,
which will drive consumer adoption way up. As a fellow investor, I think seeing this context is
really valuable, so I appreciate you sticking with me so far. Varjo isn't a publicly-traded company,
at least not yet, so let's talk about the companies that are. I think there are three kinds
of companies that are important to industrial VR. The first kind focuses on the infrastructure.
Not just headsets but virtual collaboration environments and platforms. The second kind
focuses on digitizing physical stuff -- they scan objects and environments in the real world and let
people interact with their digital twin. The third kind focuses on designing physical stuff -- they
let people build objects and environments in a digital world and then produce their physical
twin, which usually ends up being a product. Together, these types of companies are great
long-term investments today because they offer state-of-the-art products and services right now.
Those offerings will scale very well into the metaverse as VR technology continues to mature
and become more affordable but doesn't rely on that idea to succeed. So, if you want to
bet on the Metaverse but against Facebook and Meta Platforms, these stocks are a great way to do it.
Let's start with Nvidia, ticker symbol N V D A. Nvidia makes the GeForce line of graphics cards,
as well as tons of enterprise hardware and software for every type of artificial intelligence
application you can think of. They also build the superpods, which are their commercially
available supercomputers specifically designed for artificial intelligence, as well as their DGX
station, which is their server solution for data centers. In my opinion, these machines or machines
like them will run a serious portion of the metaverse. Last week, NVidia held their annual GPU
Technology Conference, or GTC, where they heavily featured their Omniverse initiative. [Short clip
of Jensen Huang] The Omniverse is a scalable, real-time development platform for collaborative
3D design and simulation. At the foundation of the Omniverse is Pixar's open-source USD, which stands
for universal scene description. This layer allows large groups of people to work simultaneously
across multiple software applications on a shared 3D scene, whether it's an automotive factory floor
or the set of a movie. This open standard foundation gives software partners multiple
ways to extend and connect to Omniverse, whether through USD adoption and support, or building a
plugin, or via an Omniverse Connector. That means Nvidia's Omniverse is an ecosystem of
development tools and assets that grows whenever a partner adds functionality to it. For example,
Apple, Pixar, and NVIDIA have collaborated to bring advanced physics capabilities to USD.
NVIDIA and Adobe are collaborating on a Substance 3D plugin that will unlock new material editing
abilities for Omniverse and Substance 3D users. The list goes on and on, but the point is this
Omniverse ecosystem is already connecting leaders from every industry to be more than the sum of
its parts, which means it will gain all sorts of customers and use-cases in the future. Lockheed
Martin is working with Omniverse to develop strategies for wildfire simulation, prediction,
emergency response planning, and fire suppression efforts. Even South Park, which is obviously the
greatest television show of all time, is exploring Omniverse to enable several of its artists
to simultaneously collaborate on scenes and optimize their insanely limited production time.
Next on the list is Matterport, ticker symbol M T T R. As their name suggests, they focus on
porting physical matter into the digital world. More specifically, Matterport creates digital 3D
models of buildings and spaces for a wide variety of applications. For example, real estate firms
can offer virtual tours, and construction firms can assess the progress of their current projects.
Architects and engineers can streamline documentation and collaborate directly within
a correctly-scaled 3d model of a project, instead of across a lot of different pieces of software.
The 3D digital reconstruction market is largely unpenetrated so Matterport enjoys a huge
first-mover advantage. In act, they have around 100 times more spaces mapped than the rest of
the market combined. They have a fully automated end-to-end digitization process that works with a
wide variety of compatible capture devices, including their own cameras as well as cell
phone cameras thanks to their android and iPhone apps. Their revenue increasingly comes from their
free-to-paid subscription model, where a team of 2 can digitize a space with their phones for free.
Then, if customers want to scale up their team, digitize more spaces,
use better cameras, or export their data in a wide variety of technical formats,
they have to upgrade to a paid monthly plan. That makes Matterport very scaleable to businesses
of all sizes, from individual projects all the way up to enterprise clients who
want to use Matterports integrations with other Building Information Modeling tools like Revit.
Speaking of Revit, the third stock on the list is Autodesk, ticker symbol A D S K. One of
the other big growth drivers for AutoCAD right now is Revit, which is a leading tool for BIM,
or building information modeling. Building Information Modeling is the process of creating
and managing information for a built asset, like a building. The model integrates different kinds
of data, including the structure of the asset, to produce a digital representation of the asset
across its entire lifecycle, from planning and design, to construction, operations, and
maintenance. BIM is quickly becoming mandated for large civil engineering projects around the world,
which is really good for Autodesk in general and Revit specifically. That's one reason Matterport
integrates with it. Autodesk is also famous for making AutoCAD. C A D stands for computer-aided
design and AutoCAD is one of the industry standards in infrastructure, architecture,
city planning, and product design. Chances are, the device you're watching this video on was
designed in or at least mocked up in AutoCAD. But Autodesk makes much more than AutoCAD.
They also make 3DS Max and Maya, which are visual effects software suites used in Hollywood
Blockbusters like Pixar's Monster's Inc, as well as triple-A video games like the Uncharted series,
Call of Duty, and even Halo. So, regardless of your opinion on the future of the internet
and the Metaverse, Autodesk is already positioned for long-term success. It has in-demand products
that are leaders in their respective industries - AutoCAD for drafting and design, 3DS Max and Maya
for visual arts and effects, and Revit for building information modeling. By the way,
Autodesk is one of the companies currently connecting to Nvidia's omniverse.
And finally, we have Unity Software, ticker symbol U, which allows developers to create
2D and 3D interactive experiences for every type of platform, including PCs and Macs,
gaming consoles, and mobile devices. Unity's solutions are very scaleable;
they support everyone from huge studios that make multiplayer games requiring powerful computers
all the way down to individual creators who just want to make
a simple mobile game. Unity's platform follows a develop-once-deploy-everywhere model where
creators can deploy their work to Playstation, Xbox, Nintendo, MacOS and iOS, and Android and
Windows. This is a big selling point. That means different operating systems and device makers
need to enter into long-term partnerships with Unity Software, to ensure that creators don't have
to learn to write any extra code just to get their projects onto one specific platform. As a result,
Unity's platform has become an industry-standard content creation tool. By their own estimates,
over half of the top 1,000 mobile games in Apple’s App Store and on Google Play
have been created using Unity’s solutions. Their primary audience right now is game developers, but
they're extending their development ecosystem to support much more than just video games. In fact,
Unity has been used to develop nearly 60% percent of ALL AR and VR content, and something like 90%
percent of the content on emerging AR platforms is made using the Unity engine. They are consistently
investing to expand their platforms to cater to industries like architecture
and engineering 3D designs, automotive designs, 3D film, and animation creation. Importantly,
Unity Software's biggest competitor is Unreal Engine, which is owned by Epic Games, the company
that makes Fortnite. Epic Games, and thus Unreal Engine, are not publicly traded. I think that's
why Cathie Wood has over 1.5 billion dollars in Unity Software stock today, making it ARK Invest's
4th biggest position overall. Interestingly enough, ARK Invest doesn't have a position Nvidia,
Matterport, or Autodesk but they haven't really published anything that suggests why.
So, comment below or tweet me at Ticker Symbol YOU with your thoughts on the current state of
VR and these companies that are connecting the physical and digital world. Do you think
the companies I talked about will be key to the Metaverse or is a different one at the
top of your list? Do you think these companies will continue to succeed even if the metaverse
never becomes a reality? I'm excited to hear your thoughts. As for me, Nvidia and Unity
Software are both already in my 100,000 dollar portfolio on Public dot com. I'm building that
portfolio from scratch to compete directly with ARKK, ARK Invest's flagship innovation fund,
which also holds a lot of Unity stock. If you're interested in following that investing project,
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My name is Alex, reminding you that the best investment you can make... is in you.