3 Tech Stocks in High Demand Powering the Metaverse
Technological advancements in areas such as extended reality (XR), AI, machine learning, IoT, 5G, edge computing, blockchain, and digital twins are merging to create immersive industrial environments. These innovations are driving the evolution from Industry 4.0 to the industrial Metaverse, facilitating virtual factories and digitalized manufacturing ecosystems.
Considering this transformation, it may be prudent to explore high-demand tech stocks like NVIDIA Corporation (NVDA), Meta Platforms, Inc. (META), and Autodesk, Inc. (ADSK), which are at the forefront of driving growth in the Metaverse.
The Metaverse and immersive technologies are reshaping the landscape of tech infrastructure, hardware, software, and services, leading to a surge in global demand for graphics, computing, networking, 3D design, engineering, and technology solutions. This growth is evident in the Metaverse market, which is forecasted to grow at a 44.3% CAGR to reach $548.18 billion by 2028, highlighting its impactful presence in the tech sector.
Furthermore, the future of the tech industry looks promising with the Metaverse stimulating advancements in virtual events, e-commerce, education, gaming, social media, tourism, NFT marketplaces, and more. These transformative applications position the industry as a lucrative investment opportunity. Given these favorable trends, let’s delve into the fundamental aspects of the three tech picks.
NVIDIA Corporation (NVDA)
NVDA offers international solutions in graphics, computing, and networking across three segments: Graphics, Compute & Networking. Its products cater to gaming, professional visualization, data center, and automotive markets.
On November 19, 2024, NVDA and Microsoft unveiled new tools for developing AI-powered Windows apps on RTX AI PCs, enhancing speed and efficiency. They also introduced advanced AI models and optimizers for digital humans and local AI workflows, boosting app performance and accessibility.
On November 18, 2024, NVDA introduced the Omniverse Blueprint, enabling real-time physics digital twins for industries like aerospace and automotive, integrating AI and advanced simulation tools. This accelerates workflows, offering up to 1,200x faster simulations and revolutionizing industrial digitalization with leading software partners.
With a trailing-12-month EBITDA margin of 63.53%, NVDA surpasses the industry average by 522.8%. Its trailing-12-month gross profit margin of 75.98% exceeds the industry average by 51.4%. In addition, its trailing-12-month EBIT margin of 61.87% is significantly higher than the industry average of 5.07%.
In the second quarter, ending July 28, 2024, NVDA reported a 122.4% year-over-year revenue increase to $30.04 billion. Its non-GAAP operating income also rose by 156.4% year-over-year to $19.94 billion.
Moreover, NVDA’s non-GAAP net income and non-GAAP net income per share reached $16.95 billion and $0.68, respectively, marking increases of 151.5% and 151.9% from the previous year. Analysts expect NVDA’s EPS and revenue for the quarter ended October 31, 2024, to increase by 85.5% and 82.8% year-over-year to $0.75 and $33.12 billion, respectively. The stock has gained 190% over the past year, closing at $142.96 in the last trading session.
NVDA’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings evaluate stocks based on 118 different factors with varying weights.
It holds a B grade for Sentiment and Quality and is ranked #41 out of 90 stocks in the Semiconductor & Wireless Chip industry. For more information on NVDA’s Growth, Value, Momentum, and Stability ratings, visit this link.
Meta Platforms, Inc. (META)
META develops products facilitating connections and sharing via mobile devices, computers, virtual reality headsets, and wearables globally. It operates in two segments: Family of Apps and Reality Labs.
With a trailing-12-month Return on Common Equity margin of 36.13%, META outperforms the industry average by 827%. Its 25.02% trailing-12-month levered FCF margin exceeds the industry average by 182.4%. Additionally, its 35.55% trailing-12-month net income margin is 955.5% higher than the industry average.
In the third quarter ending September 30, 2024, META reported an 18.9% year-over-year revenue increase to $40.59 billion. Operating income grew by 26.2% year-over-year to $17.35 billion. The company’s net income for the period was $15.69 billion, or $6.03 per share, marking a 35.4% and 37.4% increase, respectively, over the previous year’s quarter.
Analysts anticipate a 26.2% and 17.1% year-over-year increase in META’s EPS and revenue for the quarter ending December 31, 2024, to $6.73 and $46.98 billion, respectively. META has surpassed Street EPS estimates in each of the trailing four quarters and has seen a 65.7% stock price increase over the past year, closing at $554.58 in the recent trading session.
META’s positive outlook is mirrored in its POWR Ratings, with an overall rating of B, signifying a Buy recommendation in the proprietary rating system.
It is ranked #15 out of 52 stocks in the B-rated Internet industry and holds an A grade for Sentiment and Quality. To view META’s Growth, Value, Momentum, and Stability ratings, click here.
Autodesk, Inc. (ADSK)
ADSK offers 3D design, engineering, and entertainment technology solutions globally. Its product portfolio includes AutoCAD Civil 3D, BuildingConnected, AutoCAD, CAM software, Fusion 360, and Industry Collections catering to various industries like civil engineering, preconstruction, design, manufacturing, and media.
ADSK boasts a trailing-12-month net income margin of 18.21%, surpassing the industry average by 429.6%. Its 10.61% trailing-12-month Return on Total Assets is 491.7% higher than the industry average. Additionally, its trailing-12-month EBIT margin of 23.36% exceeds the industry average by 361%.
In the fiscal second quarter ending July 31, 2024, ADSK reported a year-over-year revenue increase of 11.9% to $1.51 billion. Its non-GAAP income from operations rose by 14.5% year-over-year to $560 million. The company’s net income and non-GAAP net income per share stood at $282 million and $2.15, up 27% and 12.6%, respectively, from the prior-year quarter.
For the quarter ended October 31, 2024, ADSK is expected to see a 10.5% year-over-year revenue increase to $1.56 billion, with EPS expected to rise by 2% year-over-year to $2.11. ADSK has exceeded EPS estimates in each of the trailing four quarters and has witnessed a 37.5% stock price increase over the past six months, closing at $304.18 in the recent trading session.
ADSK’s POWR Ratings indicate strong prospects, with an overall rating of B, suggesting a Buy. It is ranked #22 out of 128 stocks in the Software – Application industry and holds a B grade for Growth, Sentiment, and Quality. For ADSK’s Value, Momentum, and Stability ratings, click here.
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