2021 was the year the metaverse (Primer: What is the metaverse?) took off — but 2022 may be the year it disappoints investors. Here are two big metaverse predictions — and why investors shouldn’t fall victim to the hype cycle.

Prediction #1: Years to play out

… We’re still many years away from mass metaverse adoption — with 5-10 years of hardware evolutions away.

In November, Meta (Facebook) ignited the metaverse wars — along with nearly every stock or crypto-token related to its tech. Since Meta’s announcement:

• Stockverse: Roblox (NASDAQ:RBLX) jumped 62% and Unity (NASDAQ:U) jumped 30% before giving up its gains.
• Cryptoverse: DecentralandMANA
  and SandboxSAND
  — virtual world crypto projects — jumped over 3x and 5x.

But Meta — the company that started the movement via its rebrand — is only up 4.6%. On one flip side, its Oculus app was the #1 app on Christmas Day — a sign of strong holiday sales.

According to Qualcomm, a Meta supplier, 10M units of Oculus Quest 2 headsets were sold as of November — still a far cry from the 200M+ annual iPhone sales.

Prediction #2: Upstarts will win the metaverse war

… The current big tech giants won’t be shaping the future of VR/AR.

According to a past study, S&P 500 companies with its founder as the CEO are more innovative:

• They create 31% more patents with more value — with a greater likelihood of making bold investments.
• Founder-led company stock returns also outperformed their counterparts between 1990-2014.

Tech giants, Apple, Amazon, Microsoft and Alphabet (Google) are no longer run by their founders — leaving only Mark Zuckerberg of Meta remaining.

Popular tech analyst Tiernan Ray — a big metaverse bear — believes tech giants are incapable of building out the metaverse for the reason that:

• Dominant companies, Meta, Amazon and Alphabet, have failed to recreate successful consumer products like the iPhone.
• It’s not in the “DNA of companies such as Meta to make great consumer experiences”.

Investors: Don’t get caught at the top

These companies are unlikely to extract significant value from their investments in AR/VR or the metaverse for many years. Mobile — one of the biggest tech disruptions — took decades while going through many iterations.

Stocks and crypto tokens soared from the recent metaverse interest but like any trend — investments are prone to cycles of boom and bust. It’s difficult for sectors to repeat big returns year after year and in some cases — the faster they rise, the harder they fall.