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Augmented/Virtual Reality technologies have long been considered the next step in technological innovation. While augmented reality (AR) helps to overlay computer generated images on our real world, virtual reality (VR) helps to create a 3D environment that can be interacted with as well.

Both these technologies are intertwined but analysts observe that gradually it could bifurcate. However, at present, the hardware that is based on these technologies is struggling to find favor with the masses, primarily due to hefty prices.

Prices Slashed Massively

Last month, HTC slashed the price of Vive by $200 to generate consumer interest before the holiday season. Vive was originally priced at $799. In March, Facebook Inc (FB - Free Report) made a steep cut for its Oculus Rift headset. Price of VR headset Rift and Oculus Touch Motion controllers was slashed by $100 each. Again, the step was widely viewed as a measure to boost sales.

Rift was originally priced at $599, which has been a major deterrent for the device to gain mass adoption. Moreover, Rift has been so designed that it is compatible with only high-end PCs costing above $1K. Mainstream adoption of such heftily-priced gizmos will definitely be difficult.

Computer and Technology Sector 5YR % Return

Computer and Technology Sector 5YR % Return

Even Microsoft’s (MSFT - Free Report) $3000 priced HoloLens is mostly for developers with very little commercial use.

Is this the End of the Road for AR/VR?

Analysts dont believe so given the strong adoption of Sony Corp’s (SNE - Free Report) PS4 headset and Nintendo-Niantic’s super successful AR game, Pokémon Go. Sony’s PS4 headset success was driven by compatibility with a PS4 console and the relatively low price tag of $399. In June, the consumer electronics giant announced that it has sold over 60.4 million units of the console and over 1 million headsets.

Then, we all know how successful Pokémon Go was last year. Analysts have widely credited that the game’s AR aspect as critical to its success. Notably, Pokémon Go’s foundation was based on another AR game, Ingress, created by Niantic that compelled users to get out and interact with real world locations. Pokémon Go’s stupendous success put AR technology under the limelight.

Current Application Limited to Gaming

Nonetheless, it is but obvious that any technology at its nascent stage will take time to gain a toehold. Earlier this year, Facebook chief Mark Zuckerberg was quoted saying that though its VR efforts aren’t profitable now, he asked the investor community to be patient as the investments in VR will take some time (about 5- 10 years) to generate profits. The social-media giant has committed over $3 billion toward AR/VR research.

Per media reports, though at present VR application may be limited to gaming, it has the potential to evolve into the next computing platform but how it will evolve remains a matter of discussion.

Per ZDNet, apart from entertainment (gaming & film making), there are several other industries like healthcare and automotive, who are using these technologies. However, we do believe mainstream adoption will take some more time.

Nevertheless, growth projections are massive. According to market research firm IDC’s August report, quoted by Business Insider, total spending on AR/VR is expected to soar from $11.4 billion in 2017 to nearly $215 billion 2021, achieving a CAGR of 113.2%.

This strong spending has attracted tech behemoths, right from Facebook to Apple (AAPL - Free Report) to Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) , directing ample resources to develop these technologies.

4 Tech Stocks in Focus

We would now like to draw your attention to the efforts undertaken by these tech giants to develop this technology.

Facebook: The company is betting big on VR and striving hard to take it mainstream. Its acquisition of Oculus in 2012 was the first step. However, the company has not tasted much success with Rift, its first VR product.

Despite this the company remains upbeat about its VR prospects.

It has been widely reported that Facebook is working on a cheaper $200 headset that will make mass adoption easier. It won’t need a high end PC to work with unlike Rift. It is likely to come with its app store. Creation of an app store will help Facebook “to popularize VR headsets in the same way the Apple iPhone did for smartphones,” adds Business Insider.

Moreover, it has roped in ex-Xiaomi chief Hugo Barra to spearhead all its VR initiatives. It has also snapped up Eye Tribe (develops eye tracking technology) in 2016. The company is also working on AR glasses.

Apple: Apple CEO Tim Cook remains highly bullish on AR. He was once quoted saying not VR but AR will be “the larger of the two, probably by far”. The Cupertino-based tech behemoth has tried to take AR mainstream by making its latest operating iOS 11 compatible with AR applications.

Apple added that with the new A11 bionic chip embedded in all the three new phones namely iPhone 8, iPhone 8 Plus and IPhone X, augmented reality games and apps “reach a new level of fluidity and realism.” Also, at, WWDC, Apple had announced thatARKit will help third-party developers to work on creating AR experiences for the iOS platform.

Apple is also speculated to foray into the wearable AR glasses space and has also partnered with renowned lens maker Carl Zeiss, per media reports. To ramp up its efforts in AR hardware, 3D gaming and virtual reality software, Apple has acquired various companies like SensoMotoric Instruments, Flyby Media, Emotient, TupleJump, Turi, Metaio and PrimeSense. 

Alphabet: This tech behemoth is giving tough competition to Apple with its all new ARCore developer Kit. Similar to ARKit, ARCore will let developers create AR experiences for Android Platform. Android is indeed one of the most popular mobile operating platforms. ARCore works on Pixel and Samsung’s Galaxy 8 running on Nougat 7 and above versions. 

Then there is the company’s other AR project called Tango. Tango is also an AR computing platform that uses high end computer vision to develop user experiences such as 3D mapping, indoor navigation, physical space measurement and environmental recognition.

As far as VR is concerned, there is Daydream and Cardboard. Both are Alphabet’s VR platforms. While Cardboard uses a head mount for smartphone to let users create immersive VR experience, Daydream is an enhanced VR Platform that is built into Android OS. Daydream works on only certain phones (with Nougat 7.1 and above) including Pixel, Pixel XL, Moto Z and Galaxy S8 and S8+. The rest can use Daydream with a VR headset.

Microsoft: Microsoft has basically (and cautiously) directed its efforts toward something called “mixed reality.” Microsoft created the term “mixed reality,” which stands for a combination of AR and VR.  A few days back, the company announced that the new upgraded version of the Windows 10 operating system (OS) will support both AR and VR technologies.

Notably, the update is being considered one the major steps to get “mixed reality” technologies into the mainstream. It will reduce time and simplify the process required for setting up VR headsets.

HoloLens is Microsoft’s another noted “mixed reality” product. HoloLens is a wireless head-mounted computer that runs on Windows 10 and has in-built processors, motion sensors, camera and translucent lenses and can render high-definition holograms. As mentioned earlier, it is just for developers right now with CEO Satya Nadella saying that a commercial version of HoloLens is unlikely to be out before 2020. HoloLens has been widely put to use by NASA and the U.S military, per reports. 

All these stocks carry a Zacks Rank#3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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