2022 has been a turbulent year so far for stocks on a global scale. As investors continue to sell off their assets amidst widespread market uncertainty, we may be witnessing a key fundamental shake up of the most historically secure stocks on Wall Street. As the relative security of FAANG companies continues to be tested, it may be time to reconsider where the power lies in a market gearing up for the metaverse.
Obviously, it’s worth noting that Nvidia (NVDA) hasn’t been immune to the widespread tech stock sell-offs on Wall Street. At the time of writing NVDA sits some 47.11% adrift from its all-time high recorded in November 2021. Furthermore, Nvidia’s stock has recently dropped further in the wake of a healthy earnings report from rival graphics chip firm Advanced Micro Devices (AMD).
As the past year shows, Nvidia has experienced significant growth as news of the metaverse brought widespread investor optimism for the company’s future role in the latest evolution of the World Wide Web.
Confidence in the stock was such that it remains more than 21% up year-on-year despite a deep correction.
As investors continue to look for indicators regarding the demand for Nvidia products in the data center and gaming markets over the short-term, the company’s long-term prospects may be strong enough for its stock to finally be recognized with the same level of reverence as Wall Street’s time-honored FAANG favorites.
Growth Ahead of Metaverse Utility
Although Nvidia is expected to have its recent challenges laid bare in an upcoming earnings report on May 25th, the company is not finding it difficult to maintain its position as a market leader when it comes to GPU sales.
According to Newegg’s ranking of graphics card sales, the company’s GeForce models completely dominate the current top 10 best selling graphics cards in the U.S. Furthermore, the entirety of the top 20 is populated by Nvidia products except for one AMD entry in 15th place, which is the MSI Mech Radeon RX 6600. This means that some 95% of the top 20 best selling graphics cards are made by Nvidia.
This puts the company in good stead as the metaverse begins to take shape. Due to the immense computing power involved in creating this new digital frontier, and the all-encompassing potential that the metaverse holds across a range of industries, it’s likely that GPU products will be in far greater demand over the coming years.
“Metaverses will affect almost every industry on the planet. Regardless of what you do for a living, it’s likely that this technology will find applications in your field in the future,” explained Maxim Manturov, head of investment advice at Freedom Finance Europe. “Companies have so many ways to use spatial technology, from hosting virtual events to duplicating their inventory with 3D models or advertising using AR lenses on Snapchat, Instagram/Facebook, and soon on TikTok. According to analysts at MetaMetric Solutions, real estate sales in the metaverse will exceed $500m in 2021 and could double in 2022.”
“People are already willing to invest heavily in ‘Internet properties’, including digital real estate, digital fashion, premium cars and the like. Global giants like Unity, Apple, Meta, Roblox, Microsoft, Nvidia have created their own metaverses and continue to invest.”
“MANG” over “FAANG”?
Financial analysts at Jefferies have recently recommended that investors avoid looking to FAANG + Microsoft, and instead consider MANG as a new Wall Street standard. FAANG’s stock market collective consists of Meta Platforms (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL).
Although FAANG companies, alongside Microsoft (MSFT), have been highly popular over the past decade and beyond, the stocks are beginning to contend with deep downturns. In the case of Netflix in particular, the stock has fallen more than 70% in 2022 alone. Likewise, Facebook is currently on a 41% decline in 2022 to date.
Alternatively, the MANG Group, which consists of stocks like Microsoft, Apple, Nvidia, and Alphabet represents a better option for investors, owing to “their balance sheet, earnings yield and free cash flow yield,” according to Sean Darby, who led the Jefferies analysts’ guidance. Furthermore, Darby emphasized that FAANG + Microsoft is “not a homogenous group,” and that MANG offers investors the better opportunity for future yields.
Although Nvidia has also been badly affected by the recent tech stock sell-offs from investors, its position as a market leader in the production of GPUs may leave the company far better placed to recover faster in a market that’s set to witness the development of the metaverse. Although we’ve recently seen announcing strong earnings as a reminder that the threat of rivals is still very much present, Nvidia remains the best placed company to power the metaverse – and this remains a tantalizing prospect for investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.