Goldman Sachs’s Strategies for 4 Web3 Sectors

  • Goldman Sachs analysts predicted that the metaverse will become an $8 trillion market.
  • The bank said that four sectors, including blockchain gaming, will surge thanks to the development of Web3.
  • Insider breaks down everything you need to know from Goldman’s latest research report.

As interest in the concept of the metaverse has surged in recent months, major investment banks have begun covering the new sector.

Late last year, Bank of America listed virtual worlds as one of 14 disruptive technologies that it believes will “transform lives” over the next decade, and in November Morgan Stanley released a report that argued investing in luxury fashion stocks is one way to gain exposure to the sector.

Goldman Sachs launched its own coverage of the sector last month in a 32-page report covering the transition to Web3. The term ‘Web3’ refers to the next potential phase of the internet, which analysts expect to be more open and decentralized.

“One element of Web 3.0 that has recently captured media and investor attention is the ‘metaverse’,” a team of strategists led by the bank’s managing director for global investment research Eric Sheridan said. “[It is] a term that has taken on many meanings but with common themes around virtual and immersive experiences, online communities and the creator economy.”

“There will be [fewer]… gatekeepers for how you consume content, how you interact with creators, and you might have more control over your identity,” Sheridan said in a recent podcast. “We will interact in a more virtual world with each other.”

Goldman Sachs identified four investment opportunities that could surge due to the rise of the metaverse and Web3. Insider breaks them down below.

Four sectors that will benefit

Goldman strategists highlighted gaming companies as the most obvious beneficiaries from the rise of the metaverse. They said that the $175 billion sector will grow 8% each year for the next three years.

“We are now seeing platforms invest in a greater sense of presence and individuality in an effort to further blur the lines between virtual and physical existence,” Sheridan’s team said. “Covid-19 accelerated many of the long-term tailwinds as many consumers turned to video games as a way to connect with others virtually.”

Goldman highlighted Meta Platforms (FB), Roblox (RBLX), and Take Two (TTWO) as three stocks that could potentially benefit from the growth of metaverse gaming.

The music industry will also benefit from Web3, according to Sheridan. During the pandemic, Fortnite and Roblox both hosted avatar-based virtual concerts, collaborating with artists including Ariana Grande, Lil Nas X, and Travis Scott.

“Music on [these platforms] provides a new way for artists to connect with fans while driving engagement,” Sheridan’s team said. “management foresees a world in which artists look to leverage the platform to reach millions of fans around the world, and imagines that venues will start to scale back to more intimate settings allowing artists and fans to connect more meaningfully both in the physical and virtual world.”

Web3 and the metaverse will generate opportunities in the

retail sector

, according to Goldman Sachs. They said that potential overlaps included virtual clothes, stores, and fashion shows.

“Original brand partnerships were centered around creating virtual items or branded missions or scavenger hunts into existing experiences,” Goldman analysts said. “Now, brands are going directly to the developer community on Roblox to create limited time events to promote physical experiences.”

Sheridan’s team again used Roblox as a case study, highlighting recent collaborations including the creation of a virtual version of Florence’s Gucci Garden and partnerships with Chipotle, Nike, and Vans.

Lastly, Sheridan’s team highlighted the possibilities for education in the metaverse, highlighting virtual labs, field trips, classrooms, and extra-curricular clubs.

“Virtual educational experiences provide students with a new immersive way to learn,” they said. “As of September 30, 2021, Roblox has seen over 7 million monthly users in educational experiences.”

“While Fortnite, Roblox, Minecraft, and many other games are typically viewed simply through the lens of video games, examples across fashion, music, and education highlight the convergence of virtual and physical experiences in a Web 2.0 world,” Sheridan’s team added. “[This] gives us confidence in continued adoption of virtual experiences as well as the expansion into other categories.”

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