Morgan Stanley: the Metaverse is the Next Big Investment Theme

November 17, 2021, 9:30 AM AEST - 1 week ago

In a fairly short space of time, the metaverse has shifted from relative obscurity into mainstream consciousness. As the entire metaverse ecosystem has exploded in recent months, it remains somewhat surprising that global investment bank giant Morgan Stanley is bullish on the sector.

It can fundamentally change the medium through which we socialise with others.

Edward Stanley, Morgan Stanley equity strategist 

In a note to investors, Morgan Stanley noted that this alternative concept of reality was gaining a lot of attention from Meta (ex-Facebook) and Microsoft, both of whom are actively positioning themselves for growth in the sector.

‘Metaverse’ Next Big Investment Theme

According to Morgan Stanley, the metaverse is a concept that includes “construction of an alternative universe where individuals can model their image to whatever they want to be, and perform real-life tasks such as buying things, gaming with friends, and other activities”.

Edward Stanley, an equity strategist at Morgan Stanley, noted that there was a growing cohort of companies shifting their focus towards the metaverse. He considered tech and gaming companies as being well-positioned to profit from their first mover advantage.

Source: Morgan Stanley

Newsflow around the metaverse concept has been high and companies are embracing it in growing numbers. Of any major theme, companies and analysts have greater interest in the metaverse than any other theme at present.

Edward Stanley, Morgan Stanley equity analyst

He was, however, quick to acknowledge how early we were in the process and that a fully integrated, interoperable and collaborative metaverse would still be years away. When that time comes, users would be able to move seamlessly from one platform to another, moving their experiences and avatars with them in the process.

Metaverse and Gaming

Gaming and its relationship to the metaverse was one area that Morgan Stanley appeared most optimistic about. Noting that 50 million Americans took up gaming in 2020, the report saw three main bullish developments in the space:

  1. Social-gaming convergence – gaming has increasingly become a means for making, building and maintaining social relationships.
  2. In-game monetisation – gamers conduct in-game micropurchases to express their personalities and connect with others in the virtual world.
  3. Emergence of new games on new platforms – higher visual resolution, faster storage and enhanced gameplay are leading to groundbreaking new titles.

While older generations struggle to understand the appeal of socialising, interacting or living in a virtual world, one thing is patently clear – the younger generation not only love and embrace alternate digital realities, but in many cases they actually prefer it.

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