Virtual Reality's Payday Fast Approaches
The staples of science fiction become more and more realistic by the day as technology allows us to experience the world about is in brand-new fashions. While we've yet to achieve complete meals in pill form, flying cars will hit the roads (skies?) within the next decade, while virtual reality has finally evolved past the point of a basic gimmick. During the 1990s, flirtations with virtual reality failed to develop any type of meaningful results, most famously with the complete inability of the Nintendo Virtual Boy to achieve any type of market share. Now that an iPad has more power than the supercomputers of the 1990s, however, virtual reality has finally jumped the fence from theory into practice and profit. Facebook's Oculus Rift virtual reality system will hit the shelves come 2016, a move that will surely send Facebook's stock (FB on the NYSE, trading for $92.31 a share) higher. Yet Facebook is far from the sole company to get a big hit from the incorporation of virtual reality with everyday reality.
It's been a bad year for Intel. Heck, it's been a bad decade after the company peaked in value in 2000. Yet for all the bad news associated with Intel stock -- and there's been ample bad news -- there are few companies that stand to benefit more from a virtual reality revolution than the longtime tech giant. Intel (INTC on the NASDAQ, trading for $26.31 a share) has thrown a lot of weight and money behind the virtual experience, most notably in a collaboration with Google on Project Tango. This oddly-named collaboration combines Intel chips and three-dimensional cameras with Google's tablets in a bid to get leverage into a market that both Google and Intel badly need to catch up in. Since Intel lost over four billion dollars last year in the mobile market, they're looking for a home run and are expecting the Oculus Rift to fit that particular bill. Intel's RealSense cameras have proven to be a popular choice for virtual reality and three-dimensional modeling engineering projects, allowing users to scan objects, photograph and take videos in 3D, and project displays in virtual or augmented reality (augmented reality puts virtual displays over a real-life image, such as the back-up cameras on cars). Since Intel has taken a beating on the market, investors can pick up their stock for cheap and watch it grow come 2016. Given the hurdles that Intel has faced this year, however, waiting a few more months for the price to drop would be a better bet than buying in today.
Advanced Micro Devices
You may never have heard of the company AMD before, but if you're accessing the Internet on a desktop computer it's possible you're using one of their products right now. AMD stock (AMD on the NASDAQ, trading for $1.82 a share) has been down in the dumps of late much like Intel, for much the same reason as Intel -- cheap competitors and lack of growing computer markets. Indeed, about the only dissimilarity between AMD and Intel is that AMD peaked in 2006 rather than 2000. The reason that AMD has so much to gain from a major virtual reality surge lies in their small but steady niche. No other company manufactures the quality and quantity of graphics cards (the technology in your computer that allows you to watch 1080p video and view ultra-high definition pictures) quite like AMD. They own no less than a full quarter of the market for graphics cards, making them a particularly big fish in a particularly small pond. AMD represents a pump and dump stock, however: they're failing to live up to the mobile and tablet computer revolution, which means they need a long-term business change before they can be a long-term investment vehicle.
Better known in the media for slapping their name onto the San Diego Chargers' stadium than for their business practices, Qualcomm has nevertheless earned the slightly-condescending title of the world's largest semiconducting chip manufacturer for non-Apple products. A direct rival to Intel, Qualcomm (QCOM on the NASDAQ, trading for $54.31 a share) is far behind the curve in terms of computer chips but very, very far ahead of the curve for mobile manufacturing. Qualcomm, unlike Intel, has managed to forge a profit from their tablet chip market instead of taking it on the chin for each quarter's earnings report. Virtual Reality will be a mainstay of computers for the first months, or even the first years, but the sooner it makes it onto mobile, the faster it will grow. The disparity between traditional computer use and mobile use grows each and every day by each and every metric. Qualcomm won't invent profitable virtual reality, nor will they market profitable virtual reality, but they will likely be the first company (since Apple has so foolishly scorned the technology) to bring profitable virtual reality to mobile phones.
- The Takeaway: Virtual reality hits the shelves in the next six months. Unlike prior iterations, this version has the full backing of one of the largest corporations -- and perhaps more importantly, the largest social media outlet on the planet. While Facebook stock will likely be the biggest winner, everyone and their dog should already have Facebook in their portfolio. Tech companies like Intel, AMD, and Qualcomm that will supply computers and mobiles with virtual reality-enabled chips, semiconductors, cameras, and interface programming will be the secondary winners.
- Since each of these three companies are currently trading on six-month lows (or more -- AMD is trading on 104-week lows) they all offer fantastic value to an investor looking for bargain prices. While Qualcomm should be a long-term winner, AMD is suffering from an outdated business model and their growth will likely be temporary; consider riding AMD for three or less months before selling high. While it's difficult to project Intel's performance due to their diversity, risk-averse investors should likewise be wary of their track record and consider holding onto their stock for less than six months.