Better VR Stock: AMD vs. Apple

Virtual Reality (VR) has appeared in dozens of devices over the last few decades. However, technological advances have only recently enabled companies to deliver what VR promised 30 years ago. As a result, more and more companies are entering the growth market.

According to Grand View Research, the VR market was valued at approximately $22 billion in 2021 and is projected to grow at a compound annual growth rate (CAGR) of 15% through 2030. As the industry evolves, many VR companies are also exploring Augmented Reality (AR), which according to Grand View Research will have a CAGR of 40.9% by at least 2030. For reference, VR creates a fully virtual world for the user, while AR alters aspects of the real world through an overlay of virtual detail.

Tech giants Sony and Meta Platforms have primarily dominated the VR industry with their headsets, but Advanced Micro Devices (AMD 0.13%) and Apple (AAPL 1.56%) could play significant roles in the market going forward. As such, now is an excellent time to consider investing in one of these future industry leaders.

Is AMD or Apple the Better VR Stock? Let’s take a closer look.

Advanced Micro Devices is a leading chip supplier

AMD is best known for its role in PC components, having found immense success with its consumer lines of graphics processing units (GPUs) and processors. However, the company has steadily grown into a leading name in semi-custom chips for a variety of devices. With its system-on-a-chip (SoC), AMD exclusively supplies the graphics and computing power for Sony’s PlayStation 5 (PS5) and Microsoft’s Xbox Series X and S game consoles.

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The lucrative partnerships were the primary driver of AMD’s gaming segment growth in fiscal 2022, with revenue rising 21% year over year to $6.8 billion. Operating income increased 2% to $953 million. Any growth during the economically challenging year is impressive considering the PC market has seen sharp declines.

AMD’s chip business has led to it playing a crucial role in VR. Sony’s PlayStation VR 2 headset was released in February and runs exclusively on AMD chips through the PS5. Meanwhile, the company’s GPUs and processors have the power to run headsets like HTC’s Vive, Microsoft’s Windows Mixed Reality, and Oculus Rift (now a Meta product).

As the VR industry develops, more and more companies are likely to turn to AMD for their chips. Meta’s current line of Quest VR uses mobile chips, which are underpowered compared to a desktop PC. Future iterations of Quest headsets will likely transition to the type of SoCs AMD is producing for years to come.

Apple has the talent to dominate new markets

Various acquisitions and patents over the years have all but validated Apple’s planned foray into virtual reality. However, an increase in reports in recent months suggests that the company could launch its first headset in 2023.

In January, Bloomberg reported that Apple’s upcoming device would have VR and AR capabilities included alongside an iOS-like user interface and eye/hand tracking. Rumors have also suggested that the headset will likely launch at a hefty price tag in the thousands, but will gradually get cheaper with subsequent versions, in a similar pricing strategy to the Apple Watch.

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Although Apple doesn’t currently have a strong position in VR, its past success in entering new markets makes its stock an attractive investment. The tech giant has a proven talent for venturing into new industries and rapidly rising to dominance, as evidenced by its success in smartphones, tablets, Bluetooth headphones and smartwatches. Each of these technologies had relatively low mass adoption prior to the release of Apple’s versions, which then saw their usage skyrocket.

As a result, the company holds a leading market share of 24.1% in smartphones, 49.2% share in tablets, 34.4% share in headphones and 26% share in smartwatches. Apple’s strong brand has won consumer loyalty, which could greatly boost future adoption of VR and AR.

AMD and Apple have tremendous potential in virtual reality, one with increasing demand for its chips and the other with its reputation for succeeding in new markets. AMD’s chips give the company a fairly solid position in the growing industry, with Apple’s upcoming headset likely to increase competition and demand for AMD’s chips over the long term. With Apple’s potential role in VR still tentative, AMD’s more concrete position makes it the better virtual reality stock and a great way to invest in the burgeoning market.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Dani Cook does not hold any of the shares mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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