The great bull markets of the 1980s-90s were driven by a confluence of events, including the technological advent of the personal computer and the Internet. New industries were created, productivity increased, innovation became commonplace, and tremendous wealth was created for investors. For those of us who remember Alan Greenspan's tenure as Federal Reserve Chairman, the words "irrational exuberance" have special meaning.
Greenspan spoke this classic phrase in 1996 in an effort to warn of the dot.com bubble bursting. The late '90s were a time when money was flowing like water in the markets and trading gains were so plentiful that you had to be careful not to lose respect for the large percentage gains that so many investors were earning almost daily as the volatility was amazing. Numerous tech stocks, especially anything Internet-related, were soaring during the late stages of the '90s bull market. It was a special time, and it could actually be returning to a wearables-related stock near you very soon.
The emerging wearables revolution that is now changing the landscape of our world could become the catalyst to launch another great bull market that would rival the '90s Internet-driven bull market. It is early days in this category but already we are experiencing the creation of new industries in wearables. The pace of wearables product launches and innovation is accelerating. As a result of this advanced technology adoption, we are likely to experience a new wave of increased productivity and higher profitability for companies applying wearables products in their business models.
It is undeniable that the wearables revolution is upon us. One of the top technology advancements of our time may now be unfolding with the first generation of virtual reality, augmented reality, and mixed reality products coming to market. These platforms may very possibly disrupt and replace our world's current computing and communications devices.
The following clarification of these three key terms may be helpful:
- Virtual reality or VR immerses you in a simulated world. Here is an example of virtual reality from Facebook's (NASDAQ: FB) Oculus Rift. Please adjust the volume for the videos, go to full screen, and take a moment to have some fun with this group of demos. Please also take note of the quality of graphics, such as on the first demo, Valkyrie Founder's Pack;
- Augmented reality or AR overlays digital information on top of your real world. Please take note of the e-commerce (or v-commerce) shopping experience on the "New Morning" demo and in this AR demo;
- Mixed reality, or MR, understands your environment and enables holograms to look and sound like they're part of your world. Microsoft's (NASDAQ: MSFT) HoloLens demonstrates MR. One of the most important technologies in Mixed Reality has been developed by industry leader Magic Leap (Private:MLEAP). Magic Leap technology is a game changer.
There is much speculation on how these three similar, but different, technologies will develop and whether they will merge or diverge, or do both at once. While the future development of VR, AR, and MR will be fascinating to watch unfold, the revolutionary news for investors is this: Goldman Sachs analysts (NYSE: GS) and others believe that the race for the next computing platform is over. Click to enlarge
It is believed that the next computing platform will emerge from VR, AR, and MR technologies. Significant investments have been made to assist in the advancement of these technologies and after a long wait, these innovations are finally coming to market. As investors begin to experience significant ROI from these developing technologies the rate of investment may accelerate. New industries will be created and financed, which may give the U.S. economy and stock market a boost not seen since the advent of the PC and Internet booms. The Gartner Hype Cycle shown below depicts the raised expectations that exist for a technology years prior to it becoming a marketable product. VR, AR, and MR products are now starting to come to market. The pace of innovation and new product / application creation is likely to accelerate going forward.
Please note that Gesture Control and Virtual Reality technologies are moving forward on Gartner's curve with Augmented Reality trailing closely behind. It seems that investors and technology observers have been waiting for the arrival of VR, AR, and MR technologies for so many years now that there is a sense of malaise. It is as if we have been lulled to sleep by the years of hype regarding these technologies that delayed our desire for more immediate gratification on the overly optimistic projections. But finally, now there is something different happening. Now these technologies have advanced, they are coming to market, and they are surprising people with the possibilities for the number of possible applications. After such a long wait for this technology to arrive, the uptake cycle for VR, AR, and MR may now occur more rapidly than many expect.
One major misconception that has been widely held is that these technologies are primarily for hardcore video gamers. The fact is that business will be as important a market as the consumer for a great many applications for these technologies. In fact, Goldman Sachs and Macquarie Bank (ASX: MQG) analysts see video games as only about one-third of all usage for VR, AR, MR.
Goldman Sachs represents the VR / AR ecosystem in the graphic below. Please note that each of the more than one dozen companies bringing head-mounted devices (HMDs) are listed in this ecosystem. The supply chain companies and numerous companies developing applications for this technology are also shown. And keep in mind that these are only some of today's existing and known companies that are in the ecosystem. For example, here is a short list of stocks that will benefit from the rise of VR / AR with some of the names not included in the graphic below. The emergence of the wearables industry, including VR / AR is innovating and disrupting across much of the business landscape right now. As we progress, there will be few companies that will not be impacted either positively or negatively from the emergence of new wearables technologies.
If VR, AR, and MR technologies are analogous to the early days of the advent of the PC, then keep in mind that companies like Google, Amazon, Facebook, and many other major tech companies did not surface until some years later. This VR / AR industry is growing rapidly and will spawn new markets and many new companies that will emerge to become the household names of tomorrow. Investors will experience a large number of successful IPOs associated with the new tech boom and the arrival of new growth markets and a flood of capital to fund the need to build out the future of this nascent industry as represented in the ecosystem shown below:
The fanfare for Facebook's virtual reality product, Oculus Rift, has heralded the arrival of this much anticipated virtual reality, or VR wearables product. Please do not miss this intro to Oculus Rift from CNET since its cool factor is extremely high!
Oculus Rift could soon be 10% of Facebook's revenue, and then what? Then more than 10% is what. The number of applications for this technology are amazing with mHealth being a notable benefit for both Facebook shareholders and society as a whole. Oculus founder Palmer Luckey stated that, "Pre-orders are going much better than I ever could have possibly expected." during January's CES show. Now the recent launch of the product is experiencing success. The uptake curve of this VR technology may surprise people with the rapidity of Oculus Rift's adoption by both business and the consumer. Clearly, Zuckerberg has a plan to merge Facebook's social media platform with virtual reality.
Major analysts are largely optimistic in their projections for the growth of VR/AR hardware and software revenues. Very early indications from the sales of Oculus Rift point to this optimism being justified.
The following excerpt is taken from an open letter by CEO Zuckerberg announcing Facebook's acquisition of Oculus VR in March of 2014:
"But this is just the start. After games, we're going to make Oculus a platform for many other experiences. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face -- just by putting on goggles in your home.
This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures.
These are just some of the potential uses. By working with developers and partners across the industry, together we can build many more. One day, we believe this kind of immersive, augmented reality will become a part of daily life for billions of people.
Virtual reality was once the dream of science fiction. But the internet was also once a dream, and so were computers and smartphones. The future is coming and we have a chance to build it together. I can't wait to start working with the whole team at Oculus to bring this future to the world, and to unlock new worlds for all of us."
Nobody can argue that Zuckerberg is a visionary, but much more than that he is able to turn visions into innovations, new technology, and reality while creating value for shareholders. The Oculus communication platform that Zuckerberg envisions could be as seminal as Ray Tomlinson's contribution to developing email. And there will be numerous other wearables competitors all bringing innovations and new technologies and applications to expand the growth of these nascent technologies and markets.
In summary, our overall economy and the equities markets are likely to benefit greatly from the current emerging technologies of VR, AR, and MR. The initial wave of these new technologies may be more impactful than many expect. The first generation of VR, AR, and MR products will spawn additional new technologies and create new markets. The ripple effect from these successive waves of new technologies will be felt across world economies and stock markets.
We may experience a series of bull markets reminiscent of the 1980s - 90s when the advent of the PC and Internet technologies ushered in a massive wealth effect that created a period of financial prosperity greater than anything previously experienced by mankind.
Those who experienced the bull markets of the '80s - '90s already understand the value that major innovations and new technologies, such as a new computing / communications platform, can bring to world markets. And thereby boost stock prices that creates a wealth effect that spurs still more growth, and so on. With the bottom line being that for those investors who stay on the cutting edge of the wearables revolution, your individual net worth via your brokerage account's capital appreciation can increase significantly. And the creation of significant wealth in your portfolio may just be reason enough to stay tuned to the wearables revolution.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.