Apple's Vision Pro headset reignites the metaverse trade

Apple's Vision Pro mixed reality headset has investors taking a second look at the metaverse. David Mazza, Chief Strategy Officer at Roundhill Investments, tells Yahoo Finance Live about investor reaction to Apple's news and the parallels between AI and VR trends.

Video transcript

JULIE HYMAN: We want to turn to another topic as well, that's related to this, if you would. And we're talking about Apple debuting its Vision Pro headset on Monday. We've been talking about that all week during its Worldwide Developers Conference.

It's no secret the tech giant has been looking to compete with Meta over its VR and AR headsets. It's all the buzz. Maybe it's reigniting the Metaverse trade. So let's get back to David Mazza, Roundhill Investments Chief strategy Officer, because you guys have a Meta ETF that initially got a lot of attention last year when it was launched, when Meta was changing its name, and when there was all this discussion.

The Metaverse discussion died down. But what happened ahead of and around now this Apple event?

DAVID MAZZA: So this is fascinating. So yes, so Roundhill has the largest Metaverse ETF, ticker, METV. It's been around prior to Meta actually changing their name to Meta. Or I should say Facebook changed their name to Meta. But what's interesting is that last week heading into this Apple event, was the first time that we saw an inflow into that fund in well over a year.

So investors were staying away. I think people did plow into the space with hopes that Metaverse was going to be this next great disruptor. And it was going to come much sooner than I think folks, perhaps, expected. I think the reality set in particularly with Mark Zuckerberg famously now coming out and saying that this was going to be the year of efficiency with cost cuts and really making the harder decisions to have that growth going forward.

But now, Apple, they didn't really mention the word. We didn't expect them to either. But the idea that you can now have this augmented reality. I think it's probably difficult to think everyone's going to go out and buy $3,500 glasses. But what the technology that they showed on Monday was really good. Now, people, maybe, are hoping to jump into what that would look like 20 years in the future. But from what we've even seen in the last year, the work that was put into those goggles says that, hey, maybe this idea of AI, the Metaverse, this tech disruption could be actually happening sooner than later.

BRAD SMITH: Talk about some of the waiting, even as you're tracking the different players within the Metaverse. Because if we're tracking generative AI, everyone has pointed their attention towards chips right now to say that's the interim and near-term winner as demand builds. Are chips still the winner as the Metaverse still tries to find legs right now?

DAVID MAZZA: Yeah. So it's interesting. We actually have a generative AI ETF too, the ticker is CHAT, chat. And so the way I think about this is that many people are saying, is it either AI or Metaverse? They are interconnected. And one of the main ways they are is through semiconductors, through chips. And the leaders there, of course, are Nvidia, AMD, and others that are providing these proverbial picks and shovels to make this all happen.

And the processing power that exists now coming out of GPUs that NVIDIA has is remarkable. And that allows, I think, generative AI to happen today, where you don't need a device. You just need a smartphone or a computer. And anyone can use ChatGPT and other services like that, essentially, for free. But that also doesn't preclude the fact that something like the Metaverse, which has this longer term disruption to augment our reality can also occur too.

JULIE HYMAN: So I guess the next question is to refer back to something you said earlier, the FOMO trade, that this could be the beginning of this great FOMO trade. How much of that is driven by this generative AI? This is basically another way of asking the question that we've been discussing for weeks now, which is, are we seeing a bubble, either early stage or full fledged in some of these stocks? Or are people going to get burned for chasing the FOMO in this area in particular?

DAVID MAZZA: It's always hard to say. Now, Bank of America came out a few weeks ago and did identify it as a baby bubble, which is the first time I've heard that term. So a new one for our moniker. But there may be some truth to that. If we're saying that folks are now going to perhaps pile away from cash into equities, that is going to drive up valuations. But what I think is really fascinating about, again, generative AI is that we're not talking about, again, something that could be happening 30 years from now. And you want to put your money behind it, and because you believe that it's disruptive.

This is occurring today. Enterprises are integrating AI and generative AI into their operations very quickly helping boost productivity. Consumers are beginning to use it. We have a total addressable market on enterprise software alone of $120 billion, which is a pretty big number. And that's in 10 years, to be fair. But the assumptions to get there are not crazy. It's basically just saying, if a few more people start integrating it into their workflows, which we're starting to see, then you're going to start seeing those productivity gains. And you're going to start seeing the growth of that space.

So, again, if we continue to see the inflows and the pace that we're seeing for months and months and months, yeah, we're probably going to get a bit overstretched. But for now, the earnings are there. Nvidia's numbers and their guidance were remarkable. And I think we can't ignore that.

BRAD SMITH: What would you look for in the consumer environment to say that the valuations are eventually substantiated in some of the more cutting edge technologies that the technology companies are putting forward right now?

DAVID MAZZA: So the way I think about it is classic valuation discussion. So we know that if a company is trading at X number, let's call, it 20, for example, of earnings, they need to perhaps grow into that if their earnings aren't there.

Now, what I think is interesting, though, about this space is that there has been so much attention on the big names. Nvidia, in particular. But if you go down a layer, there are companies that perhaps are not as well known. There could be based in China or something, SenseTime, iFLYTEK. For example, they have their own large language models. They have their own AI services that they're selling into companies.

And so consumers can use it. And companies can use it. And that's why I think there's so much excitement about it.

JULIE HYMAN: Just real quickly, I noticed in your ETF also a company that we just interviewed recently, which is Nice, which does-- remember, the customer support chats. And they're now integrating some of these capabilities. So I guess there's a lot of different ways that it's going to play out.

BRAD SMITH: It was a fun conversation last week for sure.