The Next Trillion-Dollar Tech Business
A Note From Callum: James Altucher is one of my favourite writers. He’s a fine investor too, and a veteran of the hedge fund business. I’m thrilled to say that James is now part of our Daily Reckoning Australia team. I want to share his latest piece with you below.
I think it’s important to focus on the incredible opportunities in tech amid all the negativity we always hear. Notice that he mentions Nvidia [NASDAQ: NVDA] as a stock to follow closely. I highlighted NVDA on May 12. It was about US$126 then.
It’s brushing close to $US150 now. I still think it’s the kind of stock to consider accumulating on big down days where possible. That’s if you’re in for the long haul and it’s appropriate for your investment strategy.
At the very least following NVDA will tell us clues to the future of Artificial Intelligence and Virtual Reality. One reason to be positive on its outlook is the new market about to flourish, as James describes below.
Over to James…
The Next Trillion-Dollar Tech Business
‘Everyone’s going to want to use it for porn,’ I said.
I was talking with my friend Steven Kotler, author of several of my favourite books like ‘Bold’ and ‘Tomorrowland’ and one of the foremost thought leaders on the state of the future. We were talking about virtual reality.
I wasn’t right about the porn. Well, maybe I was. I’ll guess we’ll find out.
But the truth is, virtual reality has the power to impact our culture like no innovation before. We will literally be living in a new world.
You may have heard about virtual reality late last year. It got a lot of press. It’s quieted down lately, but this trend is for real.
One thing Steven mentioned is that, for reasons too complicated to dive into, VR will be able to release the five most potent pleasure chemicals in our brain: norepinephrine, dopamine, serotonin, anandamide and endorphins. These chemicals make VR really fun and addictive. Like a video game on crack.
Sign me up.
Back in the 90s, my dream was to go to graduate school to learn about virtual reality. Virtual reality was just in the beginning then.
My goal at the time was to build an artificial intelligence (AI)-based model of emotions so that the characters you find in a virtual reality can respond to with ‘real’ emotions.
Whatever. I was thrown out of graduate school so it didn’t work. But I never stopped keeping track. I watched it build bit by bit over the past two decades.
Now it is here. And we have to pay attention.
This has big implications, even outside of the porn industry. For instance, education.
That cocktail of happy hormones is really good at improving brain function and memory. This could be revolutionary for our education system in terms of customized learning and equal access for all kids.
Or jobs. Think about it. A virtual world opens up literally endless possibilities in terms of a brand new marketplace. Why go to a store to buy a shirt when you can try on and purchase a customized fit without leaving your house?
Hell, you could climb Mount Everest if you wanted to, or go to the polar ice caps to study global warming.
VR has the capacity to launch the largest migration in human history. As in, we could basically be living entirely in a virtual world. Working, making friends, having meaningful experiences.
I have to admit this to you. I’m a little scared. I don’t know exactly what this world will look like. What will this mean for the non-virtual world? Will any of us ever leave our couches again?
But the truth is, it doesn’t matter if you’re scared. People are buying VR headsets. The future is here, and it’s virtual reality. And we have to pay attention.
So here’s some good news.
Technology is constantly accelerating. Every year, it’s getting faster and faster, developing and expanding exponentially. And when it does this, it creates huge opportunity. VR is going to create an opportunity like we’ve only seen twice before.
First there was the Internet. This was a trillion-dollar opportunity. It’s still ongoing, but the Internet is the present — not the future.
The app store was the second trillion-dollar opportunity. The entire ecosystem of smartphones and tablets and the cloud and applications moved computing into our hands.
And now the third trillion-dollar opportunity has finally arrived: virtual reality. This year for virtual reality is like 1994 for the Internet. The first commercial AI headsets will be launched.
The chips are being developed. The storage is getting prepared. The entire infrastructure for the third trillion-dollar opportunity has been created in the past 20 years.
Many of the companies creating the technology and hardware are private. But some are public.
If you think that virtual reality is a rising opportunity (and you really should), then these are some public companies on the forefront of the technology:
Facebook (FB): Facebook offers the Oculus Rift headset, which went on sale for $600. It was a major hit.
The company is looking at least $2 billion in sales, but it won’t be profitable for Facebook until 2021 at the earliest. It might be interesting in the same way that Amazon (AMZN) is interesting — it doesn’t make money, but it is the platform of the future, so the stock rises.
Alphabet (GOOG): Alphabet is there too, with something called Google Cardboard, which is a simple cardboard viewer that wraps around a smartphone and costs around $20.
Rumour is they were using it as an entry for a $200-$400 version expected to launch this year.
Unlike VR, AR projects holographic images over their current surroundings. It’s an interesting twist, like a heads-up display for regular life.
Google has also invested in Magic Leap, a start-up that’s developing augmented reality technology (AR). Unlike VR, AR projects holographic images over their current surroundings. It’s an interesting twist, like a heads-up display for regular life.
Google may have failed reaching mass market with Google Glass, but they learned a lot about what the consumer wants with the technology. This could potentially give them a first-mover advantage over some of the other companies they are competing against.
Sony (SNE): Sony has developed a VR headset for the PlayStation, and it’s interesting because it has an established user base to sell to (PlayStation owners). The company’s is on track to sell 120 million PlayStation 4s during the device’s lifetime.
Apple (AAPL): This is largely speculation, but Apple did acquire a software company called Metaio $32 million and it holds several VR patents. It also bought another company for $345 million.
Microsoft (MSFT): Microsoft is going the same route as Google, with the HoloLens augmented reality device that overlays high-definition holograms in your field of vision.
Its focus is new ways to teach, create, and collaborate. HoloLens devices became available to developers in the United States and Canada last year.
Other names to watch in this space are Qualcomm (QCOM), Disney (DIS) and Nvidia (NVDA).
This opportunity is just too big to ignore.
These are some ways to invest in the virtual reality trend, and there are others ways to make money off of large trends.
I’m following them all closely.
for The Daily Reckoning Australia