Web 3.0 could be the biggest investing theme of a generation
Since its introduction in the 1990’s, the internet has continued to evolve from mere static websites (Web 1.0) to interactive web apps and social media platforms today (the Web 2.0 stage of the internet). Innovation never stops though, and the next generation of the internet (Web 3.0) is already upon us. Well-placed investors who play the Web 3.0 investment opportunity could make lasting fortunes over the next decade.
The new web is being created at immense speed right now and billions of venture capital funds are pouring into Web 3.0 start-ups. Over $30 billion in VC capital found its way into Web 3 startups globally in 2021. The smart money is jostling for positions in the Web 3 value chain. Perhaps it’s time retail investors played this new investing theme in town.
It’s still a fancy phrase, but Web 3.0, or Web3, is just another reference for an evolved internet where advanced natural language processing capabilities, artificial intelligence (AI) and deep machine learning applications are being created to power up a super-intelligent web. In Web 3.0, users of the web are not only able to consume and create new content (As they do in Web 2.0), but they will be able to own the content too.
In the ideal world of Web 3.0, the all imposing domination of tech giants like Alphabet’s (NASDAQ:GOOG, GOOGL) Google and YouTube, ownership rights domination of the likes of Netflix (NASDAQ:NFLX), and the public’s concerns over privacy issues at social media giants such as Meta Platforms’s (NASDAQ:FB) Facebook and will be reduced.
Ironically though, the Web 3.0 ecosystem could create new formidable and profitable corporate giants.
The metaverse (virtual worlds where people could meet, work, and play) could be a significant component of Web 3.0. Payments systems, currencies, and asset ownership and transfer mechanisms in the metaverse will most likely be based on blockchain technology, and I see NFTs being commonplace on the metaverse’s streets and venues.
Blockchain technology, cryptocurrencies and tokens play a critical role in ensuring decentralized ownership of digital property rights in Web 3.0. Many other players are investing billions to create the hardware infrastructure and platforms upon which Web 3.0 functions will be executed from.
Here’s a list of seven Web 3.0 plays that could be the best plays an investor may ever make this decade. They could produce life-changing returns over the next 10 years.
- Nvidia Corp (NASDAQ:NVDA)
- Meta Platforms (NASDAQ:FB)
- Coinbase (NASDAQ:COIN)
- Ubisoft Entertainment (OTCMKTS:UBSFY)
- Advanced Micro Devices (NASDAQ:AMD)
- Near Protocol (CCC:NEAR-USD)
- Cardano (CCC:ADA-USD)
Best Web 3.0 Plays to Make: Nvidia (NVDA)
A list of Web 3.0 plays wouldn’t be complete without the chipmakers upon which AI and machine learning capabilities are being built on. Nvidia is one well-positioned graphics chip company whose stock could continue to outperform as Web 3.0 evolves.
Nvidia is a leader in gaming and data center chip manufacturing and the firm has invested heavily in artificial intelligence capabilities. The company is already building AI computing chips and has deployed a software platform (Nvidia Omniverse) that Web 3.0 creators will utilize in building their metaverse products for the next iteration of the internet.
Deep learning systems capable of natural language processing will be required in an intelligent web, and NVDA is already producing advanced AI-capable chips that can empower new Web 3.0 applications and platforms. Builders of the metaverse need Nvidia’s smart chips, and Meta Platforms is spending billions building its metaverse dream.
Nvidia generated sales of $24.3 billion over the past twelve months. The company has grown its sales at a compound annual growth rate of 50% over the past five quarters, yet the cost of generating revenue only increased at a CAGR of 40% per annum during the period. Margins are expanding.
Buying NVDA stock during its current dip could set long-term-oriented investors up for significant capital gains during this decade.
Meta Platforms (FB)
Although Facebook’s recent name change to Meta Platforms was a bold statement that somehow overstretches its position in the metaverse, the move emphasized CEO Mark Zuckerberg and the team’s unwavering commitment to participate in building the next version of the internet’s new ecosystem.
Meta Platforms’s vision of living, gaming and meeting in a 3D virtual space is being backed by billions of capital investments and expenditures in making it a reality in the Web 3.0 era. Investors buying Meta (FB) stock right now will own and control a significant and dominating Web 3 asset, and shares aren’t that expensive right now.
FB stock carries a trailing-twelve-months (TTM) price-to-earnings (P/E) multiple of 21.1 is lower than that of the S&P 500 index P/E multiple of 26.1. Meta stock seems cheaper than the index, yet its business is growing at a much faster clip than the broader market. Analysts expect FB to grow revenue by 19% year-over-year in 2022, and S&P 500 companies to grow sales by 10% this year.
As can be seen, the company’s legacy businesses remain strong and could power some reasonable returns, even if the $10 billion investment in the metaverse takes time to generate revenue and profits.
Meta had over $58 billion in cash, cash equivalents and short-term investments by September 2021. The company has strong financial muscle to invest and create moats around its current businesses and even defend against competitors in the metaverse space.
That said, there’s an antitrust lawsuit involving the Federal Trade Commission to watch going forward. The legal risk may change the business’s profile if case results are unfavorable to the company.
Best Web 3.0 Plays to Make: Coinbase (COIN)
Coinbase is one of the leading cryptocurrency exchanges in the world. It could launch a market for non-fungible tokens (NFT exchange) soon. The company is investing heavily in expanding its business reach and creating moats that could make it a Web 3.0 stock with strong return potential this decade.
It is true that most Web 3.0 companies are still in their formative years and being groomed by venture capitalist (VC) funds. They’re not readily accessible on the public stock market. COIN launched a well-funded venture capital fund, Coinbase Ventures, in 2018 that is actively investing in the most promising Web 3.0 start-ups.
Coinbase’s VC fund is backing Web 3.0 infrastructure companies including blockchain network Solana (CCC:SOL-USD), BlockFi, a business offering crypto financial services, and decentralized finance projects. COIN stock could therefore offer investors an opportunity to invest in Web 3.0 stocks right before they even go public and such high return investments are usually underappreciated by a usually short-cited stock market that tracks progress based on quarterly performance.
Venture capital funds targeting the cryptocurrency and blockchain space deployed a record $27 billion during the first 11 months of last year. Coinbase Ventures reportedly made more deals than any venture capital firm during the third quarter of 2021. Perhaps COIN stock could attract attention too as the company invests in the Web 3.0 space.
As soon as VC projects blossom, venture capitalists will get their pounds of flesh ahead of everyone else. COIN could enjoy lucrative long-term returns in the new web era, making it one of the best Web 3.0 plays to make for long-term capital gains.
Tech giant Microsoft’s (NASDAQ:MSFT) latest move to acquire gaming powerhouse Activision Blizzard (NASDAQ:ATVI) in a $68.7 billion deal lifted related industry stocks. However, I find the quote from Microsoft CEO Satya Nadella’s accompanying statement about the future of the gaming industry much more bullish.
“Gaming …will play a key role in the development of metaverse platforms,” Satya Nadella was quoted in a statement accompanying the acquisition. This seems a true and powerful assessment of the gaming industry.
Ubisoft Entertainment is a France based video game company and is the third-largest independent video game publisher globally. It owns a number of well-known gaming franchises, including Far Cry, Assassin’s Creed, and the Tom Clancy branded games, such as Rainbow Six and Ghost Recon, among many others.
Most noteworthy, Ubisoft announced the first NFT integration with a game, hosted on its Ubisoft Quartz platform in December. Ubisoft Quartz is the company’s crucial building block in its unraveling vision to develop a metaverse that competes with Meta Platforms’s promised offering. Ubisoft’s NFTs are minted on the Tezos (CCC:XTZ-USD) blockchain, whose native cryptocurrency coin XTZ soared after the news announcement.
The base business could continue to produce positive operating cash flows as Ubisoft takes a leap into the metaverse. If the gamble doesn’t work out, the gaming show will still go on, but if it works out well, Ubisoft stock could pay off handsomely over the next decade.
Best Web 3.0 Plays to Make: Advanced Micro Devices (AMD)
Advanced Micro Devices (AMD) is a computing and graphics chip maker that has caused trouble for industry leader Intel (NASDAQ:INTC) in the enterprise vertical over the past three years. The battles could become even more interesting as the race to engineer the most powerful and efficient AI computing and graphics chips for Web 3.0 gets underway.
In December, Intel predicted that there would need to be a massive 1,000 times increase in computational power if the metaverse were to truly take form. “Our computing, storage and networking infrastructure today is simply not enough to enable this vision,” writes Raja Koduri in an Intel editorial.
In other words, demand for AMD’s silicon (and for other semiconductor manufacturers) could skyrocket this decade. AMD remains a high growth stock with high margins to buy, and a Web 3.0 play that could still make investors rich.
Even better, AMD finally received Chinese approval for its $35 billion acquisition of Xilinx, a semiconductor designer. The combined firm will intensify AMD’s competition against Intel in the fast-growing data center computing segment that powers internet-based applications and services.
The Xilinx deal adds immense AI capabilities to AMD’s offerings. AMD’s stock could offer immense upside as Web 3.0 supporting silicon gets hoarded by ambitious Web3 platform builders globally.
Near Protocol (NEAR-USD)
The Near Protocol’s native coin, Near, is still a little-known cryptocurrency, however, its demand could skyrocket once the blockchain starts proving its worth against first-mover Ethereum (CCC:ETH-USD) as a decentralized finance (DeFi) platform of choice.
NEAR is a low-power consuming proof-of-stake protocol that is rising to compete with other blockchain favorites that aim to dethrone Ethereum in the race to be a formidable backbone of Web 3.0 apps for DeFi.
The big and most attractive attribute of NEAR right now is its Rainbow Bridge, which allows the free movement of tokens and assets between Ethereum and NEAR.
Easy migration between ETH and NEAR assets could be a nice attribute as the Web 3.0 ecosystem grows. If the Ethereum 2.0 launch timelines continue to get delayed, and significant transaction expenses remain associated with ETH-based transactions, perhaps NEAR has a fighting chance in the Web 3.0 ecosystem.
Interestingly, NEAR has attracted a growing number of dedicated developers onto its platform over the past year.
Investors could do well to wait out for the current selling pressure to subside before loading up on NEAR coins and HODLing for future capital gains.
Best Web 3.0 Plays to Make: Cardano (ADA-USD)
Founded by Ethereum co-creator Charles Hoskinson, Cardano is a layered, proof-of-stake blockchain that promises to disrupt and challenge Ethereum’s lead in decentralized applications (dApps).
The blockchain’s native coin, ADA, skyrocketed in September 2021 to an all-time high of $3.10 ahead of the launch of smart-contract and non-fungible tokens (NFT) capabilities on the blockchain, which uses a fraction of the energy used on Ethereum to execute a transaction.
Currently trading at $1.04 at the time of writing, Cardano’s market price has tumbled with the market. However, progress in dApps development is going forward. The first decentralized exchange ADAX was launched on ADA on Jan. 30, 2022 to facilitate easy, decentralized on-chain asset transfers.
An academically peer-reviewed blockchain, ADA attracted the highest number of committed developers on any blockchain network in 2021. The market could see many Web 3.0 applications and products launch on Cardano this year, and the next.
Cardano Founder Charles Hoskinson targets creating the world’s first financial system on a blockchain that could disrupt even Africa’s microfinance lending industry where interest rates on USD loans can go beyond 25% per month.
Cardano, like Bitcoin (CCC:BTC-USD), has its total amount of issuable coins capped. Only 45 billion ADA coins will be issuable, making Cardano an anti-inflationary cryptocurrency. Once peer lending takes off on ADA globally, elevated demand for Cardano could propel the coin well beyond its September highs.
This article originally appeared at InvestorPlace.
On the date of publication, Brian Paradza did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Brian Paradza is an investing enthusiast who was awarded the CFA Charter in 2019. A strong believer in fundamentals-based long-term investing, Brian learns from gurus like Warren Buffett but acknowledges human behavioral tendencies that drive short-term “madness”.