JPMorgan Analysts Assess How Chinese Stocks Can Benefit from the Metaverse

As the next phase of the internet revolution, the “metaverse” concept has been a common topic of discourse. Analysts from JPMorgan see the possibility of some Chinese stocks benefiting if and when the metaverse project kicks off.

JPMorgan Experts Analyze Chinese Firms for Metaverse Opportunities

There was so much hype around the metaverse project when it first emerged. As a virtual space where humans can interact using their unique avatars, the metaverse has awoken another huge opportunity that businesses are willing to explore. 

However, the project has yet to fully take off, even in the United States, where the concept first emerged in Meta. The Facebook parent company has envisioned a virtual world where enterprises and individuals will meet to interact just like in the physical world. 

In 2021, the social media giant changed its brand name to Meta in preparation for the virtual transition. However, the momentum has been missing, and Meta experienced a 50% drop in its shares in 2022. 

The same argument can be made for China concerning the metaverse project. According to the analysts, it is a regulatory issue rather than an adoption, like in the case of the US. The experts point out that China has a blanket ban on cryptocurrency, a major part of the metaverse. 

Despite the setbacks, the analysts noted that some Chinese internet firms could gain from industry hype pushed by the metaverse.

Who Has to Gain?

The JPMorgan analysts highlight the Chinese Internet firms Tencent, NetEase, and Bilibili as possible enterprises to gain from the metaverse development. For the non-internet companies, China Mobile, Sony, and Agora made the cuts.

Moreover, their gains are based on their competitive edges in some aspects of the virtual ecosystem, like gaming and other social activities. The analysts further noted that there are mostly two ways firms can profit from the metaverse’s development. There are gaming, intellectual property, and digitized business and consumption.

For emphasis, China’s online gaming space has tripled its valuation from $44 billion to almost $131 billion. The two leading firms with strong online gaming presence are Tencent and NetEase. Both have global reach and strategic partnerships with other offshore gaming brands.

Furthermore, the second scenario has to do with how companies generate revenue by leveraging the hours spent by users in the digital environment. With the metaverse, the average number of hours will likely double. 

This implies that the more digital time users spend, the more revenue the company makes. Moreover, the estimate of business services and software in the metaverse is $27 billion. Meanwhile, the experts believe that digitizing the physical consumption of products and services can generate around $4 trillion in China.

The business prospects are there, considering the number of metaverse firms in China. However, things like virtual reality devices, cloud computing capabilities, and limited metaverse content are issues worth addressing.

The analysts conclude that the full metaverse can take decades to complete, but the market is huge and worth investing in.