As technology continues to impact businesses and people around the world, investors are trying to understand how these changes will affect their portfolios. The J.P. Morgan Tech Exchange 2022, held earlier this year, explored the changing technology landscape by bringing together leading experts to present insights on topics ranging from digital assets to the net zero transition.
One of the buzziest areas of interest was the emergence of the virtual world known as the metaverse, a platform that could potentially transform the way we work, live and play. The metaverse has existed in some form for decades, with online gaming applications like Second Life in the early 2000s and, more recently, in immersive games that boast hundreds of millions of users and huge supporting economies.
While the definition of the metaverse is still fluid, and likely to be for the foreseeable future, most experts view it as the next, more immersive, version of the internet that replicates elements of the physical world. Many people already see the potential of a new digital economy arising from the metaverse as a platform for users to create, buy and sell goods and services.
According to a J.P. Morgan report, Opportunities in the metaverse,1 “The key point is that there is no one virtual world but many worlds, which are taking shape to enable people to deepen and extend social interactions digitally. This is done by adding an immersive, three-dimensional layer to the web, creating more authentic and natural experiences.”
The report also notes that the metaverse will likely penetrate every sector to some extent in the coming years, with market opportunity estimated at over US$1 trillion in annual revenue.2 A number of new technologies have come together to enable this vision of the metaverse, including AR and VR headsets that have become cheaper and more powerful to improve user experience and accessibility.
Meanwhile, blockchain solutions are driving the growth of digital currencies and non-fungible tokens (NFTs) that can facilitate economic transactions virtually. Recognizing the huge potential of the metaverse, J.P. Morgan was one of the first financial institutions to establish their presence in this digital world.
A Fully Immersive Experience
While there is a vague sense of what the metaverse is, there is yet to be a clear consensus on what actually makes up this virtual realm. In a session at the J.P. Morgan Tech Exchange titled “Game On: The Metaverse and Web 3.0”, John Riccitiello, President and CEO at Unity, shared his views on where he thought this phenomenon was heading.
As head of the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content, Riccitiello is spearheading the company’s drive to grow RT3D adoption to non-gaming industries, including film and entertainment, architecture, construction and automotive.
“I haven’t seen many moments where there’s so much confusion about what something actually is. And part of that confusion is driven by some of the mega-cap companies that are trying to vision the metaverse through their own P&L. And so, they’re explaining the metaverse through the P&L advantage that they see for themselves,” says Riccitiello.
“The consequence of that is you get some very odd notions out there; that it’s all about avatars and so on, and it’s just not about what so many of them are talking about.”
Riccitiello believes that the metaverse will be comprised of 3D, interactive and fully immersive digital places that will allow you to travel without leaving your home. “Imagine having a million places you can travel to from your living room, and fully immerse yourself in. A place that feels so real that it’s like being there, and you are going to be in the middle of it.”
For instance, consumers will be able to experience “live” concerts in their living rooms as if they were actually at the venue. “We can now put artists in places where they’re just as tall as you are, and you see them standing on the stage and hear as they perform live. And we can literally increase the audience that can consume that live performance exponentially, and make it feel like you’re meters away,” explains Riccitiello.
Boundless Opportunities Across Industries
The economic possibilities and potential of the metaverse have enabled more market opportunities for every sector and industry. For instance, consumers with avatars can buy limited-edition, digitally branded clothing that they pick after browsing a virtual showroom. Entrepreneurs could start small businesses such as an art gallery to display their collections. And instead of having stores in every city, a major retailer might build a global hub in the metaverse that is able to serve millions of customers. Many retail brands have already been experimenting.
The metaverse will also provide a massive opportunity for business-to-business enterprises. For instance, a manufacturer could test their production line in a virtual environment in the metaverse at a lower cost. Imagine being able to build a complex digital twin of a factory, or industrial space, at massive scale, and test how robotics systems will interact with the physical environment.
Riccitiello notes that interest in the metaverse is especially large in Asia: “My sense is this is the right time to make the investments in that market to address the heightened interest.”
Investing in the Metaverse
While it is still early in the game, opportunities are already emerging for investors to capitalize on the huge potential of the metaverse.
“We think it’s a little bit too early to say who’s going to be the winners out of this. So, when it comes to investing in the metaverse, we think about the building blocks that will be necessary for the metaverse to be successful, and which companies already have well-established businesses in these areas,” says Cameron Chui, Executive Director and Equity Strategist for J.P. Morgan in Asia.
In particular, Chui highlights different categories of themes that could benefit from the metaverse.
Firstly, the growth of the metaverse is likely to require more processing power, which will in turn increase demand for advanced chips and give a boost to semiconductor companies. A similar explosion in data that will result from activity in the metaverse will fuel the need for more data center and cloud infrastructure-related companies to house and process this massive volume of data.
Gaming companies that have strong intellectual property or gaming experience will also be well positioned to benefit from the metaverse, as they have experience in creating content that keep users engaged in a particular virtual universe for an extended period of time.
Meanwhile, social media companies have been very successful in fostering interaction between people and giving their users a sense of community, which will be a key part of the metaverse experience. Finally, companies with experience in digital payments will benefit from the commerce that will take place in virtual worlds.
“These are already well-established businesses, and even without the metaverse they will perform perfectly fine,” says Chui. “But if you give them the additional optionality of the metaverse opportunity as well, this will be a new revenue stream for these companies.”
1 Opportunities in the metaverse: How businesses can explore the metaverse and navigate the hype vs. reality.
Available at: https://jpmorgan.com/metaverse Date as of: February 2022.
2 Grayscale, November 2021. ‘THE METAVERSE Web 3.0 Virtual Cloud Economies.’
Available at: https://grayscale.com/wp-content/uploads/2021/11/Grayscale_Metaverse_Report_Nov2021.pdf Date as of: July 2022.
Staking a Claim in the Metaverse
Reflecting its commitment to leading-edge technologies, JPMorgan Chase & Co. maintains a virtual space in the metaverse known as the Onyx Lounge, which is located at Decentraland.org.
The Onyx Lounge was created by Onyx, a J.P. Morgan business formed in 2020 to build commercial blockchain-based applications, products and infrastructure. J.P. Morgan was motivated to set up the Onyx Lounge by the idea that the metaverse will become a primary channel for commerce, providing richer, more immersive experiences.
“As a global bank with a leading payments business, offering payments solutions in this new paradigm will enable our clients to meet their own customer’s evolving behaviors by providing seamless payment capabilities across traditional and digital currencies,” says Tyrone Lobban, Head of Blockchain Launch & Onyx Digital Assets at J.P. Morgan.
“We also believe that open, interoperable metaverses will be based on blockchain technology, so there is a natural reason for us to participate more deeply given our blockchain expertise and thesis.”
Lobban notes that being an early adopter in the metaverse demonstrates to J.P. Morgan’s clients that Onyx is committed to staying abreast of the emerging trends and committed to finding new ways of doing business based on client demand.
“While it is not clear as to how the metaverse will evolve, what is clear is that the significant investment in different metaverse solutions, the attention being paid by large tech companies, the maturing of decentralized blockchain protocols, and the ability for digital assets to create new ownership models with user-centric control, will mean that the metaverse as a concept is almost certainly here to stay—and, in fact, we will probably see specialized metaverses focused on different domains in time,” he explains.
Earlier this year, J.P. Morgan released its 2022 Summer Reading List in the Onyx Lounge. A summer tradition for more than two decades, this the first time the list has been presented in the metaverse. For a limited time, visitors can use an avatar to explore a curated interactive library exhibit at the lounge, where they can learn about the books and view exclusive interviews with select authors.
Looking ahead, Onyx will continue to explore and participate in multiple metaverse environments.
J.P. Morgan Tech Exchange 2022
The Seventh Annual J.P. Morgan Tech Exchange brought together a highly impactful group of CEOs and entrepreneurs with the world’s most influential investors for an opportunity to engage in direct dialogue.
“This event has steadily emerged to become one of the most consequential forums on technology investment—and that’s because of the spotlight we put on Asia. It is recognition of Asia’s growing importance as a center of innovation and consumer demand, plus a confirmation that our region is the bedrock of increasingly complex global supply chains. From advanced electronics to semi-conductors, Asia is moving towards the heights of the global value chain,” said Kam Shing Kwang, CEO of J.P. Morgan Private Bank in Asia & Vice Chair of Investment Banking for Greater China at J.P. Morgan, in her welcome remarks.
Some of the illustrious speakers at the event included: Jack Zhang, Co-founder and CEO of Airwallex; Andrew Forrest, Chairman and Founder of Fortescue Metals Group and Fortescue Future Industries; and Robert M. Gates, the 22nd U.S. Secretary of Defense.
Participants were also able to explore the latest developments in the tech world through a virtual showcase at the event.
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