2 Stocks to Invest in Virtual Reality – The Motley Fool

The virtual reality (VR) market is still in its early stages, but it has the potential to become an important segment of the broader tech space as consumer and enterprise VR reaches an estimated $25 billion market size less than three years from now.

Two companies that have a good chance of successfully tapping into this growing market are Microsoft (MSFT 2.30%) and Apple (AAPL 1.88%). These tech giants are already knee-deep into VR and augmented reality (AR) in their own ways, and could end up benefiting from their early moves. Here's why.

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Like so many other tech companies right now, Microsoft has its own AR/VR headset. But unlike many of its peers, Microsoft's headset, called Hololens, is already being used for real-world applications.

Industrial manufacturers and healthcare companies have used Hololens to train employees, and so far Hololens already has 200 partner apps for the device, in addition to Microsoft's own apps.

But the most notable use-case for Hololens thus far has been for the U.S. Army. Microsoft currently has a contract worth up to about $22 billion to deliver 120,000 Hololens units to the armed services division, and recently sent its first shipment of 5,000 to the Army.

Those devices are an adapted version of Hololens called the Integrated Visual Augmentation System (IVAS), and can tap into Microsoft's Azure cloud computing services to monitor and display specific sensor data.

Of course, Microsoft isn't only interested in deploying Hololens for the armed services, but this initial order does show that there are practical uses for the device and that Microsoft is already receiving potentially large contracts for its headset -- something most tech companies can't claim right now.

Not only that, but if Microsoft can showcase just how well its Azure cloud services pair with its headset, future uses of its Hololens could be a boon to the company's already successful cloud computing service.

Apple has already made some headway into the AR/VR space with the company's push to bring augmented reality apps into its App Store. Already, there are more than 14,000 AR apps that work on the company's mobile operating system -- and Apple is likely just getting started.

The company is reportedly working on an AR/VR headset that it's already shown to its board of directors. This indicates that Apple could be very close to launching the device, though it's still uncertain when it will do so.

Apple is especially adept at pairing software with hardware. And another indicator that it's close to launching a headset comes from the fact that leaked source code has shown that the tech giant is working on what it calls RealityOS, likely a reference to an AR/VR operating system.

If and when Apple debuts its headset, some analysts have estimated that the company could generate up to $18 billion in headset sales just five years after its launch.

Some of the latest estimates put the launch of Apple's AR/VR headset at the end of this year or next year, which means investors may not have to wait much longer to see Apple take this market head-on.

While there's a lot of potential for Microsoft and Apple to benefit from AR and VR, investors will likely have to be patient to experience it.

These segments of the tech world are just getting started, and it could be a few years before Microsoft and Apple see any direct benefit to their top and bottom lines.

Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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2 Stocks to Invest in Virtual Reality - The Motley Fool