This Tech Sector Pioneer Just Bet on the Newest "10-Bagger"-Plus

After more than two decades of teases, virtual reality (VR) is about to go mainstream.

And I mean soon.

That's because several leading companies in the tech sector are planning to launch consumer head-mounted displays in the fall - or soon thereafter.

This newest version of VR - the one that video gamers will be lining up for at Best Buy - is way more advanced than the not-ready-for-prime-time version we saw in the 1990s and early 2000s. This version will immediately provide totally immersive play for gamers, and will soon be applicable to other consumer areas, like for movie watching and as a next-generation social-media platform.

You've likely heard of the Oculus Rift VR headset from Facebook Inc. (Nasdaq: FB), and maybe the Gear headset from Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF).

But there's another tech leader out there with a VR system that's ready to go - and I believe the CEO's commitment to the VR program's success underscores why his company's stock remains a great long-term buy

Consumer VR is a field that could expand to at least $5.2 billion - some 58-fold - by 2018.

Let's see how we can grab some of that extreme growth - below Wall Street's radar...

The New Reality

tech sectorClearly, there's a lot riding on Project HoloLens, the glitzy, feature-packed VR headset from Microsoft Corp. (Nasdaq: MSFT).

Readers often ask me why I'm so bullish on Microsoft CEO Satya Nadella.

Actually, the answer is pretty easy.

It's because he's able to identify innovations like VR, make them part of the emerging Microsoft "ecosystem" and then ramp up profits with them.

Many investors still think of the world's largest software firm as one rooted in PCs and business software.

But this is no longer the Microsoft of Bill Gates and Steve Ballmer.

Instead, Nadella is using Microsoft piles of cash - $92 billion - to move the Redmond, Wash.-based company into technologies, like VR, that are both cutting-edge and poised for hypergrowth.

There's a lot to admire about Project HoloLens. Nadella has told colleagues and the media he believes VR is the next big phase in consumer technology.

And I agree. VR headsets and software - now that the technology meets consumer demands - fit right in with our video games, social networks, and mobile devices.

Also known as an "augmented reality" device, Project HoloLens contains an onboard camera and a computer hooked up to 18 sensors that transmit a tidal wave of data every second.

Running on the Windows 10 operating system, Project HoloLens has more computing power than a laptop. It operates without wires, and the headset responds to voice, gaze, and gestures.

More to the point, it can focus a hologram into a room. A hologram is a 3D image created by a photographic projection.

In fact, HoloLens is powerful enough to simulate physical places like the surface of Mars, which is why NASA teamed up with MSFT for one incredible cause...

The Martian Chroniclers

NASA is using Project HoloLens at the agency's Jet Propulsion Laboratory in Pasadena, Calif.

NASA wants to harness Project HoloLens so it can turn the Mars Curiosity rover into a telepresence robot operating on the Red Planet.

Data streamed from Curiosity will allow NASA's software to create 3D simulations of Martian landscapes. It's a key part of the NASA's research into using robotic spacecraft to explore a planet in detail before sending a manned mission there.

Just as you'd find in any gaming console, Project HoloLens contains powerful central processors and graphics processors.

But the headset also contains something brand new - a holographic processing unit (HPU). This is a chip optimized to allow users to interact with 3D holographic images.

Add it all up and you have what I believe is a very bold initiative for Microsoft's new CEO.

Not Your Father's Microsoft

And it shows just how much Nadella wants to distinguish himself from Gates and Ballmer.

To be fair, Project HoloLens began under Ballmer. But if history is any guide, he was unlikely to emphasize it as a breakout for Microsoft.

Just look at what happened with Kinect. That's a motion-sensing platform that played a huge role in the 2010 version of the popular Xbox 360 video game console.

Microsoft was unprepared for Kinect's impact beyond gaming. Turns out, the technology had multiple business applications as well.

Just look at healthcare as one example. With Kinect's gesture controls, surgeons could access patient files, send alerts to other doctors, and even pull down facts from the Web - all without leaving the confines of a sterile environment.

Nadella isn't taking any chances with Project HoloLens. Yes, he does intend to start with gaming.

In fact, that's a key reason behind his decision last September to buy Mojang AB, the Swedish company that makes the Minecraft video game for $2.5 billion.

Minecraft is an insanely popular game among young people. It has been downloaded more than 50 million times since its 2009 release. And it's a good fit for Microsoft - the game already integrates into Xbox, and will do so with HoloLens as soon as it's released.

Minecraft's popularity depends on its open-ended possibilities - as a so-called "sandbox" game, it allows players to build just about anything with a series of blocks that are part of a world inhabited by dangerous creatures like zombies and giant spiders.

Nadella knows that although VR is just getting started the technology could spread throughout the economy.

Extreme Growth

Indeed, the VR research firm KZero says the tech industry faces a very bright future, with this year marking a turning point in the technology's adoption.

In a recent report, KZero estimated total consumer VR sales in 2014 of just 200,000 units - sales of about $90 million (including software, too). Of those, most went go to hard-core gamers and other early adopters.

By the end of this year, sales are projected to rise to 5.7 million units, a 28-fold increase. Though that sounds massive in its own right, that's just the beginning of the breakout for this technology.

By 2018, total sales in the consumer market will hit 56.8 million devices. That's just short of another 10-fold increase.

When you throw in software sales, KZero says the total consumer VR market will have a value of roughly $5.2 billion in 2018. Of that figure, about half is for software, including games, apps, and other uses still to be defined.

Analysts haven't estimated the size of the VR business market. But Mark Little, an industry analyst at Ovum, recently told Forbes that VR technology has several commercial applications.

Little says the technology is finding its way into healthcare, where it is being used for medical simulations. He also thinks it can be employed in high-tech manufacturing of spacecraft, airplanes, and cars.

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]

U.K. fashion chain Topshop has experimented with VR, Little notes, bringing shoppers to the runway show of its latest clothing lines.

And Project HoloLens has another ready application - integrating with Microsoft's Skype phone-calling/video-chatting service. It would give those communicating through Skype a sense of actually being in a unique space with others on the call.

To be sure, Microsoft faces competition for HoloLens. Last year, Facebook agreed to pay $2 billion for Oculus Rift developer Oculus VR.

Facebook execs are convinced that this is a breakout technology with potential for online and mobile gaming, as well as communications, media, entertainment, and education.

But I think there's plenty of room in VR for Facebook, Samsung, Microsoft - and also the headset reportedly under development at Apple Inc. (Nasdaq: AAPL).

For instance, Facebook could leverage its online and mobile social networking user base. Microsoft could focus on selling HoloLens to its millions of Xbox users, not to mention the hundreds of millions who use Microsoft's software every day.

To help generate buzz, Microsoft has launched a website devoted to the product. However, it still has not revealed just how much the device will cost or when it will officially go on sale.

But Project HoloLens has already started to garner glowing reviews from gaming/VR experts at Wired and Gizmodo.

In other words, it looks like Nadella has a hit on his hands.

With a market cap of $361 billion, MSFT trades at around $44 a share.

At that price, I think it's a bargain, especially when you consider it's pushing the boundaries of a whole new way of computing that has broad applications.

Thus, Microsoft's foray into virtual reality is not a stretch from the company's core business - but the right thing to do.

It shows the company still has the power to innovate with best of them - and offer investors great long-term gains.

We're Detecting a Pattern Here: We've predicted that Apple Inc. (Nasdaq: AAPL) will reach a split-adjusted price of $1,000 a share by Labor Day 2016. Turns out, the stock is ahead of our projections. As of Feb. 27, AAPL is at $130, just 9.9% from hitting that milestone. We have another big projection to make. Here's the company that will double your money by 2018...

About the Author

Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...

  • He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
  • He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
  • As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.

This all means the entire world is constantly seeking Michael's insight.

In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.

Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.

And even with decades of experience, Michael believes there has never been a moment in time quite like this.

Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.

To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.

His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.

Read full bio