Analysts at UBS have uncovered a slew of less obvious stocks along the metaverse supply chain that it thinks will benefit as the metaverse takes shape. The metaverse is likely to be the next growth engine for tech companies, with the convergence of digital and physical worlds envisioned as the next chapter of the internet, the bank's analysts, led by Grace Chen, said on Dec. 8. As the industry is still nascent, investors could be forgiven for thinking Meta — previously known as Facebook — was the main way to gain exposure to the industry. But UBS thinks there could be other opportunities, such as along the semiconductor or hardware tech supply chain. Tech infrastructure is likely to be the building block of the metaverse, Chen said. The commercialization of augmented reality and virtual reality devices — which UBS views as the "gateway" to the metaverse — is also a key ingredient for the success of the metaverse, Chen noted. "We believe the metaverse will likely be an incremental growth driver for the tech supply chain once VR/AR devices reach a higher penetration and have broader applications in consumer and commercial segments," Chen said. Meta's Oculus and Google are already in the VR/AR devices market, while Apple , Sony and Xiaomi are all expected to introduce AR or VR glasses in the near term, Chen added. Stock picks California-based Nvidia , the world's largest manufacturer of graphics and artificial intelligence chips, is one of UBS' picks. The company's Nvidia Omniverse platform is expected to be the foundation of the metaverse, allowing different parties to work together in real time across leading software applications in a shared virtual world, the company said. These creations can then be taken into the physical world after they have been perfected in the digital one, the company added. UBS has a price target of $350 on the stock, which closed at around $318 on Dec. 8, representing an upside of 10%. The bank also likes Taiwan Semiconductor Manufacturing Company . The world's largest foundry supplies chips to Nvidia and is expected to benefit from rising demand for high-performance computing applications. UBS has ascribed a price target of 710 Taiwanese dollars ($25.60) on the stock, which closed at 608 Taiwanese dollars on Dec. 9 — an implied upside of 17%. Taiwanese semiconductor firm MediaTek also makes the UBS list on expected incremental demand for connectivity and networking chips in VR/AR devices. South Korean electronics giant Samsung is the bank's pick as a supplier of OLED, Micro OLED and memory components. UBS has a price target of 1,250 Taiwanese dollars on MediaTek, representing a potential upside of 15% to the stock's closing price on Dec. 9. The bank has a price target of 97,000 Korean won ($82.50) on Samsung — an implied upside of 24%. Taiwan-based camera lens maker Genius Electronic is another of UBS' picks within the tech hardware supply chain. The bank says the company is a key supplier of see-through lenses and camera lenses for Meta, HTC , Sony and likely, Apple. UBS expects sales of the company's VR lens to more than double from about 5% of its total revenue in 2021 to 11% in 2022, Chen said. The bank has a price target of 590 Taiwanese dollars on the stock, representing a 6% upside to its closing price of 557 Taiwanese dollars on Dec. 9. Apple supplier Quanta is also on the UBS list. The electronic hardware manufacturer has supplied approximately 60% of Meta's servers in 2021 and counts the likes of Google and Microsoft among its customers in the cloud segment. The bank has a price target of 110 Taiwanese dollars. The stock closed at 89 Taiwanese dollars on Dec. 9, implying a potential upside of 24%. Cloud infrastructure provider Wiwynn rounds off the UBS list, with the bank putting a price target of 1,200 Taiwanese dollars on the stock. The company currently supplies about 40% of Meta's and Microsoft's servers and should continue to gain market share in Amazon's servers, Chen said. UBS has a price target of 1,200 Taiwanese dollars on the stock, which closed at 1,080 Taiwanese dollars on Dec. 8, representing an upside of 11%.
An attendee wears an Oculus Rift virtual reality (VR) headset during the Intel Corp. press event at the 2017 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Wednesday, Jan. 4, 2017.
Patrick T. Fallon | Bloomberg | Getty Images
Analysts at UBS have uncovered a slew of less obvious stocks along the metaverse supply chain that it thinks will benefit as the metaverse takes shape.