Pauline Llandric, portfolio manager at AXA Investment Managers, believes opportunities will arise for investors as AI accelerates the development of the metaverse.
Generative AI is set to turbocharge the development of the metaverse, opening up new opportunities for investors seeking to benefit from its potential to change the way people live and work, according to AXA Investment Managers.
Portfolio manager Pauline Llandric says that generative AI has accelerated the metaverse’s progress towards a more immersive and integrated experience that will drive further developments and ultimately more investment opportunities.
“AI is a cornerstone of the development of the metaverse, but generative AI goes a significant step further, making it quicker and easier to transform ideas into highly realistic content and experiences,” says Llandric.
“This is a crucial shift for companies and for investors. For example, gaming companies can design increasingly sophisticated and lifelike games and worlds, broadening their appeal to consumers and bringing in new revenue.”
While developers like Roblox, which lets gamers earn revenue from creating their own games, are poised to benefit, Llandric points out that the metaverse extends far into other areas, such as socialising and working.
“Businesses creating digital twins – a digital copy of a physical object or place, for example to design or modify a product in an easier, safer and more responsive environment – can use generative AI to work much faster and more efficiently,” Llandric says.
“The potential uses of digital twins are myriad, from testing car parts in crash scenarios, to Siemens’ involvement in the North Devon UNESCO Biosphere. This AI simulation of a river area, combined with outdoor sensors collecting data such as soil health and water levels, allows experts to address issues such as flood risk and land degradation.”
Healthcare is another sector harnessing the possibilities of the metaverse. Virtual reality headsets, for example, can facilitate more realistic, meaningful interactions with doctors than a telephone call. “Generative AI can also help update patient notes faster, saving doctors time, while digital twins can help diagnose illnesses or allow surgeons to practice operating,” says Llandric.
In the commercial world, companies using AI in the metaverse may be able to respond to changing customer demand more quickly and accurately – analysing consumer behaviour to create both more personalised experiences and innovative offerings. “For instance Snap recently launched a service offering augmented reality and AI tools to retailers which lets customers try on clothing and accessories virtually, potentially boosting their engagement with the brand and translating to sales.”
According to Llandric, Generative AI should also help overcome a key growth constraint: new content.
“For the metaverse to scale up, a large amount of new content is needed – which in the past has been a barrier to more rapid growth. Generative AI allows anyone with a creative idea to use the technology to bring it to life, while professionals can ask generative AI to build the more standard parts of their design while they focus on adding value in other aspects.”
Behind this they say are the tech companies providing the building blocks and infrastructure of these platforms, such as Nvidia, Marvell, Synopsys, TSMC and ASML. The growing complexity of the metaverse requires increasingly sophisticated chips and tools for chip design, creating demand and potential new investment opportunities.
“The growing industry also needs more infrastructure than is currently available, leading to significant capital expenditure expectations on facilities such as data centres and house computer servers,” says Llandric. “Data centre leasing in the US has risen to record levels with operators able to charge a premium for capacity.
Another area where the team sees potential is the increased crossover of firms which previously were experts in other markets, but are now taking a stake in developing metaverse.
“Companies are increasingly crossing the boundaries between gaming, socialising and working, as the metaverse becomes more integrated and holistic rather than a collection of silos,” says Llandric. “For example, Apple’s Vision Pro will use AI and augmented reality to blend digital content with the physical world. With the iPhone 15 Pro having spatial video capabilities, creating 3D content in the future may become as widespread and accessible as 2D photo images and videos are today.
“Similarly, Unity is well-known in the gaming space. But it is also increasing its foothold in other industries such as manufacturing, energy and retail allowing companies to use its services to create digital twins, factory simulations, virtual shops and more.”
