Wall Street's Metaverse Obsession Takes A Big Hit

Wall Street is convinced it's discovered the future of Silicon Valley. But early bets on the "metaverse" are running into some turbulence, Julia Horowitz reported for CNN Business.

Photo Insert: Shares of video game developer and industry leader, Roblox were down 16% in premarket trading on Wednesday after the company's earnings missed expectations.

What's the metaverse? It's a virtual world in which people hang out, attend meetings and play games as avatars. It's generating tons of buzz. But shares of video game developer Roblox, an industry leader, are down 16% in premarket trading on Wednesday after the company's earnings missed expectations.

While average daily active users hit 49.5 million, up 33% year-over-year, bookings — which measure the amount of virtual currency purchased by users to upgrade their avatars — fell short of forecasts.

The platform, which is super popular with kids, has been a go-to for investors looking to get in on the tech industry's push to make the metaverse the next big thing. In a note to clients earlier this week, Bank of America analyst Omar Dessouky said the metaverse as an investment class "is now like social media at its dawn."

He said Roblox, which had a market value of more than $42 billion as of Tuesday's close, "bears resemblance to a young tech giant," even though it was founded in 2004.

Roblox has a head start on competitors, which Bank of America expects will be slower to reinvent themselves as metaverse companies.

Roblox's control of the technology that underpins its platform, from development tools to graphics software and data centers, allows it to innovate quickly.

And in the future, its immersive online world may not just be for children, as Roblox works to build a digital environment — and economy — that's "increasingly engaging and indistinguishable from the real world."

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