Since the beginning of 2022, high inflation has been hanging over the US economy like a Sword of Damocles. It is generally expected that the Fed will end its bond purchases in March and start raising interest rates in June 2022. As a result, the stock market and high-yield bond market have been under pressure, and investors who cannot find good investment targets have poured into commodities.

However, we believe that commodities are great short-term anti-inflation investments instead of long-term ones. History tells us that equity is the only way to outperform in the long-term. For the equity market, the current state is at a low level. We believe it is essential to find fields with more potential for the next five to 10 years, and metaverse concept stocks are one of them.

Just like the controversy over smartphones 15 years ago before the birth of the iPhone 4, we believe that the metaverse is at a similar stage because the current communication technology and hardware equipment cannot meet the requirements of real metaverses. More importantly, the lack of a coherent cross-world ecosystem also matters.

For these two aspects, we believe that, although the latter is difficult to predict and realize (top players may establish their networks, like CDMA vs. GSM in the early 2000's), the former can be arranged in advance through analysis. We believe that the following four areas are suitable for early layout in the metaverse space, from an investor's point of view.

XR-Related Equipment & Brain-Computer Interface

Extended reality (XR), including AR/VR/MR, is undoubtedly the first to be mentioned. The combination of XR technology and metaverse concepts is projected to create a new virtual reality space, the simplest and most conceivable way of realizing the metaverse.

In 2015, XR investment, financing, and M&A was only $800 million. By 2016, this figure soared to $3.26 billion, five times that of the last year. However, we believe that XR is not the final form of metaverse hardware, but instead the brain-computer interface.

Famous science fiction works such as The Matrix have shown people a possible future of the metaverse space. Through the connection between the brain and computer, people may freely obtain information, socialize, and even bring the experience of taste, touch, and other senses into the virtual world. However, this technology still has extraordinary challenges in technical development and is under criticism regarding ethics.

In this field, we believe that small- and medium-sized companies that can open the market with XR related equipment in the medium- and short-term (such as three to 10 years) and have brain-computer interface research plans or research potential in the long-term (more than 15 years) could be beneficial investment targets in this field.

NFTs

A piece of virtual real estate on Decentraland was recently traded in cryptocurrency with a record price of $2.4 million, which once again aroused people's attention to metaverse NFTs. Oly sports from Canada also launched a 1:1 purchase and exchange business of natural and virtual real estate.

Real estate is highly electronic in the current virtual reality system, and electronic real estate has become a legal asset. But we believe that it is too early to pay a high premium for metaverse real estate. This is because no dominant platform can attract brands to enter and occupy the primary user market.

However, the good thing is that a consensus exists that such a platform will be developed by technology giants first. Therefore, we believe that in the field of NFTs, small- and medium-sized enterprises that pay attention to the trends of major technology giants and the investors looking for NFT real estate dealers on their platforms may become future winners.

AI & 3D Interoperability

Although the metaverse is a digital virtual world, this world is likely to generate from the real world and provides people with experiences close to the real world through images, sound, and even touch. In other words, to build real metaverses, people need to replicate the real world with the help of 3D technology at the initial stage. This is why 3D Interoperability is crucial to the metaverse.

In the metaverse, a high-quality user experience comes from real immersion based on excellent 3D effects. However, at the same time, traditional 3D Interoperability has its limitations. That is, the workload of building meta 3D interoperability is difficult to be realized by human power.

Fortunately, AI and machine learning can help realize this process. AI can turn a collection of 2D images into an explorable 3D world. Scientists successfully used neural networks machine learning to infer representations of 3D scenes from photographs, but the process isn't fast enough to make them feasible for building a metaverse.

However, according to MIT Computer Science and Artistic Intelligence Laboratory (CSAIL), new technology can represent 3D scenes from images about 15,000 times faster than before. We think this is an excellent opportunity.

We suggest investors pay attention to the relevant research of Vincent Sitzmann's team in MIT and related companies involved in the subsequent technological transformation of the technology, which we think could be great targets.

6G Communication

In June 2021, China's IMT-2030 (6G) Promotion Group released the white paper on 6G Vision and Candidate Technologies. And the white paper summarizes 6G vision, driving forces of 6G development, candidate use cases of 6G, and ten candidates for 6G technologies, which we think indicate upcoming opportunities.

The maturity of the metaverse is a long-term evolution process, accompanied by the long-term evolution of wireless communication technology. 5G can not fully meet the needs of metaverse for wireless communication, but according to the white paper, most of the scenarios encountered by 6G technology are useful for the metaverse.

Therefore, we believe that 6G wireless communication will form an underlying digital base for the metaverse's vision to a great extent.

In this field, we believe that medium-sized companies with 5G technology support and those engaged in 5G/6G communication chips, millimetre-wave photoelectric chips, RF filters, high-speed photoelectric devices, and sensors may be the main dominant power and targets in the future.

Here are some companies that we think may provide further opportunities in this trend.