In 2023, AI took center stage, with tech giants like Nvidia (NVDA), Google (GOOG, GOOGL), and Microsoft (MSFT) driving the AI hype cycle. Losing momentum over the past year, did the AI frenzy steal all of metaverse's thunder?

Wagner James Au, Author of Making a Metaverse That Matters, joins Yahoo Finance Live to weigh in on the metaverse’s outlook for 2024 and whether a comeback is possible. “The metaverse is all about community and user engagement,” insists Au, who believes that AI will need to rely on the metaverse users for development.

Au notes that Roblox (RBLX) is a stand-out star among metaverse platforms.

Follow along with Yahoo Finance's 2024 Investor Guide for more expert insight, or click here to watch this full episode of Yahoo Finance Live.

Video Transcript

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BRAD SMITH: To say that 2023 was the year of artificial intelligence would be an understatement from NVIDIA to Google to Microsoft and OpenAI-- Silicon Valley just couldn't get enough. But with the AI hype cycle in full force, it feels like one immersive reality play lost some steam-- Metaverse here. The Meta Platforms went all in on the AI capabilities, and CEO Mark Zuckerberg said that these tools will soon be integrated into every single one of Meta's products.

So with more tech giants buying into the AI craze, will 2024 be a defining year for the Metaverse? Let's bring in Wagner James-- James Au, who is the author of "Making a Metaverse That Matters" as part of Yahoo Finance's 2024 Investor Guide. Great to have you here with us.

First and foremost, when you think about the year that has been for generative AI and how much of perhaps the Metaverse wind that it took out of the sails here, is there still perhaps an overlap or a cross currents that the Metaverse could benefit from?

WAGNER JAMES AU: Oh, definitely. Because the metaverse is all about community and user engagement. So the thing people miss with generative AI is you need a use case, you need people actually using it in a social context. And so the Metaverse-- despite what Meta has been trying has actually been growing in terms of monthly active users.

And I'm talking about the Metaverse as defined by the novel "Snow Crash," which was incredibly influential to thousands of technologists. And that's still growing quite a bit, upwards of 600 million active users led by Roblox actually is the leading Metaverse platform.

And they're experimenting with generative AI, for example, if you want to create a virtual world or space and you can use generative AI to create 3D graphics quickly in the background, so kind of average users can create really spectacular scenes, generative AI is very powerful. So yeah, I think the Metaverse-- Metaverse platforms is going to be a major use case for generative AI.

SEANA SMITH: So Roblox you're seeing as one of the leaders here in this Metaverse development. For investors out there who are trying to capitalize on this momentum that you see carrying into the new year and expanding, what are some of the other top picks that you have?

WAGNER JAMES AU: Well, the other big thing to look at was the lawsuit Epic Games versus Google. Epic is the other leading player with Fortnite, and that's been a rapidly evolving Metaverse platform. But really their winning the lawsuit against Google is going to empower any Metaverse platform which depends on smartphones, and really all of them do.

So obviously, Roblox, there's some other players like Rec Room, VRChat, and they are moving into mobile as kind of the main access point. And the fact that they're not going to be under the thumb of Google hopefully, depending on what the Supreme Court says, is going to be very powerful for all of these other players that, like I said, are continuing to grow in terms of mass active users.