We’ve been here before. Back in 2003, an app called “ Second Life” promised a new way of living virtually, by using avatars to shop and socialise. While big brands rushed to open virtual stores, “Second Life” never attracted more than a million regular inhabitants. More recently, video games such as Fortnite and Roblox have created metaverses for their online players, and hosted virtual concerts featuring stars such as Ariana Grande and Travis Scott that have attracted many more attendees than in-person shows. One Korean tech company already has hundreds of millions of metaverse users. Now Facebook, which recently rebranded as Meta , is developing its version of the metaverse. The question is whether the site’s billions of users will embrace it. The current excitement, combined with a pandemic-induced surge in virtual socialising, suggests they might. Mentions of the metaverse in company meetings have accelerated at a far faster pace than that of previous technological trends. The pull of its metaverse, Facebook hopes, will be the merging of the digital and physical worlds. This metaverse will be accessed not through panes of glass, but via virtual reality or augmented reality headsets that project interactive images onto your physical surroundings. This world is “persistent” which means that it continues to exist and develop even when there are no people interacting with it. VR headsets already allow people to immerse themselves in the digital environment of games, but now AR is taking this one step further by superimposing objects onto the real world. Why does this matter? Because while the metaverse may be overhyped in the short term, over the long term, it could well be the future of the mobile internet. Ten years ago , the internet evolved from something people viewed on desktops to an always-on mobile connection wherever you went. With the metaverse, the mobile internet will jump out of peoples’ pockets and become a digital layer enhancing the surrounding world. The possibilities are endless. Consumers can use headsets to teleport to the Olympics, change the view from their window to a Caribbean beach, or box with Mike Tyson. The potential may be impressive, but the technology needs to improve before the metaverse is widely adopted. AR headsets require enhanced computing power, battery life, projectors and frame design to become commercially viable, and all that will take time to develop. Big Tech beware: Asian creators are rewriting the future with Web 3.0 There are also ethical concerns. Despite Facebook’s pledge that the metaverse will be an open and diverse space, it is unclear how internet giants might work together to achieve this and whether the gaming industry will be able to shake off its troubled history with inclusivity . There are fears that the metaverse could exacerbate a two-tier system that excludes those without internet access, while the immersive nature of the metaverse means it could be even more addictive than 2D mobile apps. Caution is required, then. But the firms that manage to crack these issues could be on the cusp of a multi-decade growth story. Technology hardware firms will be the first in line to benefit should American tech giants like Apple launch branded VR headsets in the next two to three years (Facebook has already launched one but has more ambitious versions in the pipeline). The initial boost to revenues will probably be limited, given that the headsets are expected to cost about US$3,000, beyond the reach of many. Nonetheless, the integration of hardware and software should eventually support higher valuation multiples for some firms. Three key trends driving Asia’s start-up boom in 2022 Suppliers of key components like processors and sensors could be early beneficiaries. Companies that produce 3D sensors could see their valuations improve as headsets become less reliant on cameras, while firms producing processors for 3D graphics and the AI engines necessary for crunching real-time data could also garner more attention. Software and apps will probably develop along with hardware and headsets as products are adopted by a broader market. The companies delivering these will perhaps be best placed to take advantage of the metaverse (apps and platforms typically have higher margins than technology hardware), with advertisers sure to follow. American firms are not alone in wanting in on the metaverse. Chinese businesses including Tencent, NetEase and Baidu are embracing it, too. Tencent is a shareholder in Fortnite creator Epic Games , and appears well placed to build different ways for customers to translate 2D activities, such as ordering dinner, buying tickets, purchasing insurance and seeing the doctor, into a 3D world. Despite tighter regulation in China , the government appears generally supportive of metaverse development (although it is likely to impose restrictions on underage content). Meanwhile, more than 400 Korean companies, including Samsung, have formed the K-Metaverse Alliance. Asia is also home to a large proportion of global VR and AR component and headset makers, meaning the region could become a powerhouse of metaverse hardware. Back to our original question: does the metaverse matter for investors? It does. Maybe not immediately – it will take time for the technology to evolve, costs to fall and the metaverse to move into the mainstream. But it already seems to have gained much greater traction globally and among the big tech players than previous incarnations. And, over a longer time horizon, it could have a big impact on companies across the global technology supply chain, and eventually on the rest of the 2D economy. The metaverse is the future of the internet. Tina Tian is a portfolio manager on Fidelity’s China Innovation Fund