Like many emerging technologies, virtual reality (VR) is a nascent industry, that is long on promise and short on mass-market products. Only a handful of companies currently ship VR products, and many of those products still fall short of their much hyped, game-changing potential.
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However, as plenty of past tech trends have demonstrated, investors who are patient enough to allow this trend to develop could ride this wave to ample profits. Keeping that in mind, let's review why shares of Facebook (NASDAQ: FB), Sony (NYSE: SNE), and Advanced Micro Devices (NASDAQ: AMD) each make for interesting potential investments in this still-blossoming tech market.
The world's largest social-media network has moved aggressively to buy up many next-gen communications companies over the past five years. In doing so, it has largely focused on two core areas: mobile messaging platforms and virtual reality.
Facebook shelled out $2 billion in cash and stock to buy VR hardware and software start-up Oculus in March 2014. The much-discussed VR rig then went on sale in the U.S. last year.
Though technologically impressive, the Oculus -- and other virtual reality rigs like it -- have a number of headwinds that many think it will need to overcome before becoming a truly mass-market phenomenon. This chiefly includes its high sticker price of $599 and its reliance on running from PCs with high-end graphics capabilities. If the device can overcome its pricing and compatibility issues, Oculus could take off.
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Sony joins Facebook as one of the leading manufacturers of VR headsets with the PlayStation VR, which it launched last October. Perhaps unsurprisingly, Sony has pursued a similar pricing strategy in relation to its VR headset as it has done with its highly popular PlayStation consoles.
Sony chiefly competes with Microsoft (NASDAQ: MSFT) and its Xbox franchise in the console-gaming market. Though they largely vie for the same customers, Microsoft has historically gravitated toward a slightly higher pricing strategy compared to Sony.
As just the latest example, Microsoft recently garnered criticism when it announced it planned to price its forthcoming Xbox One X console at $499, $100 higher than Sony's PlayStation 4 Pro console. Similarly, Sony has chosen to undercut Facebook's price for the Oculus, charging $499 for a bundle that includes the PlayStation VR headset and controllers.
However, like Facebook and Samsung, commercial success has been slow to come by for Sony's PlayStation VR. Recent figures from research firm IDC claimed Sony shipped 429,000 PlayStation VR headsets during the first quarter of the year. This represents nice progress for the Japanese electronics giant, but it also reiterates that VR still has a long way to go before becoming a true mass-market medium.
I wanted to highlight a potential component play as the final piece of this discussion, and though it isn't as clear-cut as the other names on this list, chipmaker AMD certainly is worth considering. The company has two potential points of exposure to this end, so let's quickly examine them both.
The first opportunity for the company lies in VR-enabled PCs. One of the key pain points in VR gaming is its annoyingly high component costs.
As previously mentioned, VR rigs like Facebook's Oculus rely on VR-optimized personal computers to handle the bulk of the image-processing workload. This means consumers must own two fairly expensive pieces of hardware in order to get a truly satisfactory VR experience. To help lighten the cost, AMD's VR-quality Radeon chips start at $199 and have been cited by PC industry publications as an ideal way for enthusiasts to reduce the cost burden relative to more traditional (and expensive) image-processing chips, like those manufactured by NVIDIA.
A second, more long-term potential growth catalyst is that AMD could eventually provide processors for stand-alone VR rigs. AMD's semi-custom chips already power the Xbox One and PlayStation 4, the gaming industry's most important consoles. As such, it certainly seems plausible that AMD would jump at any opportunity to provide the combined CPU and GPU technology for VR headsets should the opportunity arise.
Of course, this involves a little projection on my part, but AMD's experience in VR graphics chips and ongoing supplier relationships with gaming leaders makes this an interesting option for prospective investors to consider.
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Nvidia. The Motley Fool has a disclosure policy.