- Will Metaverse be a place to make money anytime soon, or ever?
- Meta is under pressure over its $69 billion bet on this VR space
That’s the question investors have been asking this week, as the outlook for US tech giants betting on this or any other form of life-changing innovation suddenly looks much less rosy.
For now, at least, Wall Street seems to be frustrated with global “disruptive” tech businesses in Silicon Valley or Seattle.
Over the past few days, traders have sold shares of Meta, the owner of Facebook, Instagram, and WhatsApp, and a leading member of the movement that sees Metaverse as “a fundamental part of the future.”
Harsh reality: Facebook owner’s $69 billion bet on the Metaverse infuriates investors
Meta is under pressure over its $69 billion stake in the virtual reality space and its ability to counter the threat to Instagram from video app TikTok. As Chris Ford, head of equity growth at Sanlam Investments, points out, TikTok is not only the world’s largest social media platform, but is also owned by the Chinese.
As Ford emphasizes, the perception of America as the only innovation center worthy of support may change.
At the beginning of this year, Meta’s market value was nearly $1 trillion. It has now fallen to almost $263 billion, leaving Mark Zuckerberg, Meta’s boss and largest shareholder, less wealthy than before.
Many British investors also got worse. These include not only those who work in technology funds and trusts, but also investors with savings in some general funds.
Concerns over Meta’s strategy have highlighted the erratic profits of other tech titans.
Alphabet, the owner of Google, is down 35% this year. Apple shares were less affected, but as reported in this column, the iPhone maker is now considered more of a luxury goods business.
This may be some consolation for those who have money in the F&C trust, where Apple is the third largest holding and Microsoft is the largest. Microsoft shares, which have fallen 33% since January, are also owned by another very popular Fundsmith fund.
So should Wall Street’s new aversion to technology be a signal for British investors to end their relationship with these US companies? Technology stocks have flourished in part because of low interest rates and a fast-paced, easy-money environment.
Jason Hollands of Bestinvest is cautious.
“We are in a completely different environment. The easy money days of quantitative easing have boosted these stocks. “We’re not going back there anytime soon.
If you can afford it, you may be in the mood to sit back and wait for some relaxation in the current economic and geopolitical turmoil, sharing Ford’s view that this week’s debacle was an overreaction.
He believes that while the pandemic’s reverence for tech firms and their disruptive power during the pandemic may have been exaggerated, the current pessimism is misplaced given that the potential of artificial intelligence (AI) has yet to be fully realized.
AI will be a key focus for Alphabet and Microsoft. They are busy with what Ford describes as the more “prosaic parts of the Metaverse,” using it, for example, as a means of exchanging production projects rather than as a place for avatars to communicate. if you have savings in a technology fund, 90% of it is likely to be invested in the US, meaning you may not be exposed to innovations hatched elsewhere. China may already be ahead of the US, but this is overshadowed by sanctions against its manufacturers.
These considerations should send a signal to all who want to benefit from innovation to spread their nets wide.
For example, the Augmentum Trust invests in fintech firms that support the digital transition of traditional banks.
This trust, which has a 41% discount to its net worth after the recent devastation in the sector, is a bet on UK plc. According to manager Tim Levene, 17 of the 24 holdings are British players in a global market that could be worth $12 trillion in a few years.
I will remain an investor in F&C, Fundsmith and a Scottish mortgage fund that has a stake in TikTok owner ByteDance.
Despite my love of bargains, I’m not going to take the advice of the brokerage AllianceBernstein to shut my nose and buy the Meta, as it looks like the destroyer has already gone off the rails.
Credit: www.thisismoney.co.uk /