The evolution of the virtual ecosystem has been significantly accelerated by the rise of social media and mobile internet access. Currently, there are over 2.4 billion users on Meta (formerly known as Facebook), alongside billions more utilizing platforms like WhatsApp and YouTube. This staggering number of users illustrates just how interconnected the digital world has become. The distinctions between digital and physical life continue to blur, with a multitude of daily activities such as socializing, entertainment, and shopping increasingly occurring in early metaverse environments.

This shift has catalyzed advancements in areas like virtual learning, workplace collaboration tools, and blockchain-based gaming economies. According to NewGenApps, the realms of virtual reality (VR) and augmented reality (AR) gaming are projected to attract 216 million players globally by 2025, yielding a market valuation of an impressive $11.6 billion. A survey from 2024 highlighted that 34% of game developers worldwide are actively developing titles for the Meta Quest Store, indicating robust interest among developers in immersive gaming platforms.

Looking ahead, the global video streaming market, vital for immersive media, is anticipated to reach $674.25 billion in 2024. Moreover, the Business Research Company forecasts that the global metaverse market will expand from $227.05 billion in 2024 to $316.34 billion in 2025, representing a remarkable compound annual growth rate (CAGR) of 39.3%. In contrast, S&P Global Market Intelligence estimates that global metaverse revenue will surge from $17.5 billion in 2023 to $54.5 billion by 2028, growing at a steady CAGR of 25.5%. Significantly, businesses have emerged as the primary consumer segment within this market, driven by the necessity for digital twin software and remote collaboration tools. S&P notes that in 2023, businesses solidified their role in the metaverse, accounting for 42.8% of the entire market.

The metaverse's growth is largely attributed to the integration of content streaming with blockchain infrastructure. Blockchain technology has enhanced secure transactions, digital asset ownership, and governance, fostering user-driven economies where individuals can create, sell, and profit from their digital experiences, much like the gaming platform Roblox. Concurrently, the rise of 3D platforms, virtual marketplaces, and immersive gaming environments is driving considerable investment in these sectors.

The metaverse, categorized under the video game industry, represents a rapidly expanding digital frontier where immersive technologies collaborate to craft interactive virtual worlds. This expansive universe is constructed upon the principles of virtual reality (VR), augmented reality (AR), blockchain, and mixed reality, providing simulated spaces for social interaction, work, education, and recreation. Essentially, the metaverse blends digital and physical realities to deliver personalized and immersive experiences through avatars, real-time communication, and spatial computing. Users are transitioning from merely browsing static web pages to exploring dynamic 3D environments that enhance real-world interactions, marking a significant evolution from basic applications to fully immersive virtual spaces. The metaverse is broadly classified into four categories: lifelogging, augmented reality, mirror world, and virtual reality.

Recently, we published an article detailing the 12 Best Metaverse Stocks to Invest In. In this piece, we will explore the standing of Microsoft Corporation (NASDAQ:MSFT) in comparison to the other top metaverse stocks.

Additionally, generative AI is poised to transform the next chapter of the metaverse, offering innovations such as personalized content suggestions, automated dubbing, editing, and enhanced visual effects. Streaming platforms are now leveraging advanced language models like GPT-4 to facilitate real-time content creation and moderation, ensuring that digital interactions remain safe and accessible. While the broader metaverse is still a work in progress, the technologies that underpin virtual economiesranging from play-to-earn games to NFT marketplaces and digital event ticketingare already generating income opportunities for both users and developers. According to the Entertainment Software Association, approximately 227 million Americans engage in video gaming on a weekly basis, with an average player age of 31, indicating a growing mainstream acceptance of immersive content across various age demographics. The integration of AI with VR/AR technologies is expanding the horizons of platforms beyond just gaming and entertainment into fields such as healthcare and business applications.

As users increasingly demand more personalized, high-resolution experiences, metaverse technology is evolving to incorporate low-latency infrastructures. Platforms like hesp.live are revolutionizing streaming capabilities, delivering rapid content for gaming, education, and live shopping experiences. Initially, the metaverse faced considerable criticism due to unsatisfactory user experiences and difficulties in user engagement. Even though public interest has waned since 2022, progress within the metaverse has not stalled; it remains in its infancy, with continuous advancements propelling it forward. These developments, coupled with the rising demand for video-on-demand services, underscore the deep integration of the metaverse into contemporary digital viewing habits. While North America currently leads the market, with major companies and significant digital expenditures, the Asia Pacific region is also poised for growth due to the rapid adoption of immersive technologies.

This indicates that the metaverse is far from being a fleeting trend; it represents a fundamental transformation in how individuals live, communicate, and connect within digital environments. As these immersive environments disrupt traditional media formats, the metaverse is emerging as a promising avenue for investment.

Our Methodology

To create our list of the 12 Best Metaverse Stocks to Invest In, we conducted extensive research to identify companies with noteworthy exposure to metaverse technologies. Initially, we employed stock screening tools, ETFs, and online rankings to draft an extensive list of relevant companies. Next, we collected data on the number of hedge fund holders invested in these companies as of Q4 2024, utilizing information from Insider Monkeys hedge fund database. The final list comprises stocks that exhibited the highest levels of hedge fund interest.

Why do we focus on stocks that hedge funds favor? The rationale is straightforward: our research indicates that mirroring the top stock selections of leading hedge funds can result in superior market performance. Our quarterly newsletter utilizes a strategy that highlights 14 small-cap and large-cap stocks each quarter, achieving an impressive 373.4% return since May 2014exceeding its benchmark by 218 percentage points.

Is Microsoft Corporation (MSFT) the Best Metaverse Stock to Invest In?

Microsoft Corporation (NASDAQ:MSFT) stands as a formidable global technology leader with a diverse array of operations spanning software, cloud services, enterprise solutions, gaming, and hardware. Within the metaverse sector, the company has been making significant strides through its Azure cloud offerings, AI platforms like Copilot Studio, and immersive products such as HoloLens and Xbox Cloud Gaming. These innovations lay the groundwork for virtual collaboration, content creation, and the development of digital realms.

For the second quarter of FY2025, ending December 31, 2024, Microsoft reported revenues of $69.6 billion, reflecting a 12% increase from the previous year. Concurrently, operating income surged by 17%, while the cloud division achieved a record revenue of $40.9 billion, growing by 21%, with Azure services specifically increasing by 31%. Additionally, AI services significantly contributed 13 points to Azures growth, and Microsofts business software segment saw a 14% rise to $29.4 billion, attributed to the success of Microsoft 365 and Dynamics 365. However, the companys free cash flow dipped by 29% to $6.5 billion as a result of substantial capital expenditures.

Microsoft is continuously enhancing its AI capabilities within the metaverse through Copilot, which is now utilized by over 160,000 organizations. In parallel, Azure AI experienced a remarkable 157% year-over-year growth, while GitHub reached a milestone of 150 million developers. Furthermore, Xbox Cloud Gaming recorded unprecedented usage, with 140 million hours streamed during the quarter. Simultaneously, Microsoft Fabric and Power BI also demonstrated impressive growth, reinforcing the companys leadership in cloud data and analytics, elements that are critical for creating immersive experiences.

Looking ahead, Microsoft Corporation (NASDAQ:MSFT) is well-positioned to leverage its expansive cloud infrastructure and AI capabilities to bolster metaverse integration. The company anticipates continuing its trend of double-digit growth in both revenue and operating income, with improvements in profit margins on the horizon. Despite encountering challenges in non-AI Azure offerings, LinkedIns hiring solutions, and gaming hardware, Microsoft remains a top contender in the metaverse stock landscape due to its strong foothold in digital productivity, AI, and immersive platform innovation.

Overall, MSFT ranks first on our list of best metaverse stocks to consider for investment. While we recognize the substantial potential of MSFT, we also believe certain AI stocks may offer more significant opportunities for higher returns in a shorter time frame. For those interested in an AI stock that has shown promise since the start of 2025 and trades at under five times its earnings, we invite you to explore our report on this promising investment.

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Disclosure: None. This article was originally published at Insider Monkey.