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Meta Platforms (NASDAQ: META) is well-known for its social media platforms like Facebook, Instagram, and WhatsApp. But what some investors might not realize is that roughly 10 years ago the company acquired a virtual reality (VR) start-up called Oculus. While the initial thesis revolved around Meta’s interest in the gaming market, Oculus might now present even broader opportunities — namely, the metaverse.

While advertising still delivers the majority of Meta’s revenue and profits, the company’s pursuit of the metaverse shouldn’t go overlooked. More specifically, the investments Meta is making in artificial intelligence (AI) could help unlock the next phase of growth for the social media behemoth. And considering that Meta has been working on virtual reality projects for nearly a decade via its Oculus portfolio, there is reason to believe the company has a massive edge in virtual and augmented reality relative to its peers.

While VR is currently a nominal part of Meta’s business, some on Wall Street are calling the company’s technology a “gamechanger” — specifically, famed investor Cathie Wood, founder and CEO of Ark Invest. The investment management firm recently released a report detailing Meta’s latest foray into virtual and augmented reality (AR) — smart glasses.

Based on what Meta is working on, and how artificial intelligence (AI) is playing a crucial role, now could be a great time to scoop up shares in the stock while most investors still view the company as an advertising business and are overlooking other future catalysts.

Seeing is believing

Meta’s primary source of revenue is advertising as it accounts for nearly 99% of all sales. The other 1% is derived from Meta’s Reality Labs business. Reality Labs is a hardware operation that sells virtual reality headsets, known as Meta Quest (formerly branded under the Oculus name). Although virtual reality is just a tiny part of Meta’s business today, there are many reasons to believe it could quickly become a meaningful driver of growth. In fact, Meta is investing significant capital into its metaverse ambitions, and the company’s latest installment of smart glasses is already garnering a lot of interest given its ties to AI.

Meta’s smart glasses will be powered by an AI assistant and include several unique features. For example, the glasses will be able to pair with apps such as Spotify or Instagram, allowing users to listen to music, answer phone calls, or take pictures simply by clicking a button on the side of the fashionable shades.

According to Ark Invest’s report, the AI assistant in Meta’s glasses responds “to voice messages in an intuitive and nuanced way far superior to Siri and Alexa Voice.” Siri is the virtual assistant developed by Apple, natively built into all iPhones. Meanwhile, Alexa is the voice-powered technology integrated into many of Amazon‘s smart-home appliances.

While these smart glasses may seem a little gimmicky, consider some of the broader applications. By providing users the ability to answer phone calls, Meta is putting itself in a position to take away market share from Apple’s popular AirPods. To me, the allure of Meta’s smart glasses is pretty clear. However, some investors may have a feeling of foreboding about the technology — and for good reason.

Image Source: Getty Images

Are you having déjà vu?

If the underlying specs of Meta’s smart glasses seem familiar, it’s probably because they are eerily similar to those of devices developed by other tech cohorts.

Back in 2013, Alphabet released a product called Google Glass. These glasses were powered by natural language processing and could transparently display images and information that one might find on the Internet. It was similar to having a projector right in front of your eyes. While some speculated that the technology would have useful applications for the military and even in some aspects of healthcare, Google Glass never really took off. In fact, after a decade of development, Alphabet finally abandoned the hardware project in March.

Another company that has tested out the smart glasses market is Snap, the maker of photo and video app Snapchat. Snap has been making inroads in augmented reality via new features in the mobile app as well as through physical sunglasses branded as Spectacles. While the enhanced social experiences in the app appear to be popular among Snap users, the jury is still out on the overall sentiment of the Spectacles. Nonetheless, it seems that Snap’s management remains committed to pursuing its augmented reality ambitions for now.

Given the mixed results that other tech innovators have had from their smart glasses efforts, some investors might be wondering if Meta’s foray along the same lines is just another big bet destined to fail.

Could virtual reality be the next pillar for Meta?

According to a report published by global consulting firm McKinsey, the immersive reality market is set to grow at a compound annual rate of 24% and reach a size of $1.2 trillion by 2035. While this might add some validity to Meta’s ambitions, investors might be wondering what exactly immersive reality means.

As I alluded to above, the smart glasses represent a way for Meta to touch multiple end markets, including smart appliances, the metaverse, and voice-powered artificial intelligence (AI). In my view, the smart glasses could help Meta start penetrating the Internet of Things (IoT) and evolve from being purely an advertising platform. With that said, the forecast by McKinsey makes clear that mass adoption of this type of technology is over a decade away.

I view the long-term prospects of VR, AR, and IoT as a major benefit because I think most investors are not even considering these markets as drivers of Meta’s future growth. Instead, my belief is that investors now are scrutinizing Meta’s ability to integrate AI into its core ads business and gain momentum in the space over competitors like Alphabet, Pinterest, or TikTok.

Given how connected Meta’s ecosystem is via its various social applications including Facebook, Instagram, and WhatsApp, it seems like bringing augmented reality to the table is a natural fit with the company’s overall mission to help people connect. For these reasons, I think Meta could be an underappreciated artificial intelligence (AI) opportunity, and long-term investors should consider scooping up some shares.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Pinterest, and Spotify Technology. The Motley Fool has a disclosure policy.

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