Bitcoin (BTC) and other cryptocurrencies have generated a lot of buzz on Wall Street in recent years, but many technology experts say their underlying blockchain technologies will ultimately have far more of an impact on the world than the currencies themselves. They say blockchain technology could be the bedrock of Web3, a catch-all term for a decentralized next generation of the internet that shifts control from Big Tech companies to the users themselves. Artificial intelligence and machine learning technology would likely be ubiquitous in Web3, making the internet a much more useful, powerful and adaptive tool for all users.
Unfortunately, the concept of Web3 is still in its infancy at this point, so stocks focused exclusively on blockchain technology, the metaverse and building Web3 infrastructure are likely facing a difficult and risky road ahead. Web3 is also more of an idea and narrative than an actual network at this point, adding more risk and uncertainty to the equation.
Some of the best-performing stocks of the past two decades – such as Meta Platforms Inc. (ticker: META), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG, GOOGL) and Netflix Inc. (NFLX) – played a central role in the way we currently interact with the web, and investors who identify Web3 stocks early could generate some equally massive returns.
Here are five of the best Web3 stocks to buy today, according to Bank of America analysts:
Nvidia designs and sells high-end graphics and video processing chips used for desktop and gaming personal computers, workstations, and other advanced computing servers and supercomputers. No matter what form Web3 ultimately takes, it will most likely require a tremendous amount of processing power supplied by Nvidia chips.
The Nvidia Omniverse is a computing platform that enables development of Universal Scene Description (OpenUSD)-based 3D workflows and applications, allowing creators to build custom extensions, tools and metaverse applications using little-to-no coding.
Analyst Vivek Arya projects all of Nvidia’s demand catalysts will allow the company to maintain at least 22% annual revenue growth through at least 2026.
“We believe NVDA is still in the first (approximately) 25% of converting the $250 (billion) of global compute infrastructure to accelerated/AI computing,” Arya said in a research note.
Bank of America has a “buy” rating and $700 price target for NVDA stock, which closed at $630.27 on Feb. 1.
Meta Platforms Inc. (META)
Meta Platforms owns and operates some of the world’s largest social media and messaging platforms, including Facebook, WhatsApp, Messenger and Instagram.
Meta has emerged as one of the biggest winners from the current iteration of the internet, and its control and use of user data, controversy surrounding user privacy and content censorship are often cited by Web3 proponents as motivation for building a more decentralized web. But Meta CEO Mark Zuckerberg has always had a strong vision for the future of the internet, and the company has shifted its focus to building a metaverse that incorporates blockchain and AI technology, as well as virtual and augmented reality features.
“With a favorable macro backdrop for advertising, Reels contribution turning positive in 2024, a large messaging revenue ramp in progress, strong AI assets driving results and still plenty of costs to cut if needed, we remain constructive on the stock,” analyst Justin Post wrote in a note.
Bank of America has a “buy” rating and $425 price target for META stock, which closed at $394.78 on Feb. 1.
Block is a financial services and digital payments company and is the parent of the Square payments platform for businesses and the Cash App digital payments app. Block allows Bitcoin trading through its Cash App and holds Bitcoin on its balance sheet as an alternative to cash.
Block was a pioneer in decentralized, peer-to-peer payments, and decentralized finance (DeFi) will likely play a core role in Web3. Block’s Spiral subsidiary builds and funds free, open-source projects specifically aimed at making Bitcoin the world’s leading currency.
Analyst Jason Kupferberg says Block’s management team has refocused on improving execution heading into 2024.
“We remain confident in (Block’s) business model quality, expect to see results from SQ’s refocused strategy and believe shares are undervalued,” Kupferberg wrote in a note.
Bank of America has a “buy” rating and $85 price target for SQ stock, which closed at $66.67 on Feb. 1.
Roblox is an online entertainment platform that allows creators to develop games, and it may be the closest thing to a functioning metaverse today. Roblox had 70.2 million daily active users as of the third quarter, its own digital currency and a range of unique virtual experiences. About half its users are under age 13, potentially positioning the company very well for the future, including Web3.
Roblox CEO David Baszucki has seemingly embraced the Web3 principles of decentralization and interoperability, recently telling CNBC that blockchain-based non-fungible tokens, or NFTs, and other digital assets could eventually move seamlessly across the Roblox ecosystem, including to and from other Web3 platforms.
Analyst Omar Dessouky wrote that Roblox is “a clear metaverse and (user-generated content) leader that we expect to grow faster in the next five years than any other gaming or social media asset.”
Bank of America has a “buy” rating and $54 price target for RBLX stock, which closed at $39.33 on Feb. 1.
Unity Software owns one of the two main 3D video game engines, which allows designers to customize how video game players move and interact within their games.
In 2023, Unity added a new decentralization category page in its Unity Asset Store, which contains solutions to support developers focused on enabling decentralization in gaming. Many gaming enthusiasts and investors envision the Web3 version of online gaming will include in-game ownership models that allow players to earn, create or obtain in-game resources that they can then sell and trade within or across different networks using blockchain technology.
Analyst Michael Funk projects Unity will continue to generate annual revenue growth in the double-digit percentage range for the foreseeable future.
“Improved monetization of U’s industry leading mobile game creation engine paired with a stabilizing mobile game advertising market create a compelling risk-reward profile, in our view,” Funk wrote.
Bank of America has a “buy” rating and $55 price target for U stock, which closed at $31.97 on Feb. 1.
