The real reason for investing 1 billion U.S. dollars, Ali Google, and betting on AR/VR?

In recent reports from international media, an analysis by Digi-Capital, a leading investment bank, highlights that despite being in its early stages, the AR/VR industry has seen significant investments. In the fourth quarter alone, companies like Alibaba, Alphabet (Google’s parent company), Spark Capital, and Temasek Capital Ptd. Ltd. have poured over $1 billion into AR/VR startups. This marks only the second time since 2016 that AR/VR investment has exceeded $1 billion in a single quarter, showing growing interest in this emerging sector. With major tech giants such as Apple, Alphabet, and Facebook launching their own AR platforms, the user base for augmented reality is expanding, and business models are beginning to take shape. The potential of AR/VR is becoming more tangible, with real-world applications already making waves. Augmented reality (AR) involves overlaying digital images onto real environments, similar to how Pokémon Go brought virtual creatures into the physical world. On the other hand, virtual reality (VR) immerses users entirely in a simulated environment, typically through headsets or other screens. The bulk of the AR/VR funding in the fourth quarter came from two major fundraising rounds: Magic Leap secured $502 million in its D-round financing in October, while Niantic, the developer behind Pokémon Go, raised $200 million in its Series B round in November. Investors included big names like Temasek, EDB Investments Pte. Ltd., Brazilian media giant Grupo Globo, Janus Henderson, and existing backers such as Alibaba, Google, Fidelity Management and Research, among others. Despite the massive funding, Magic Leap hasn't yet released any commercial products—whether hardware or software. However, it previously raised $800 million in the first quarter of 2016, when total AR/VR investments hit $1.2 billion. The success of the Pokémon Go game in 2016 demonstrated the massive potential of AR, sparking widespread interest. Ben Schacter, an analyst at Macquarie Capital, noted that the game proved AR could become a mainstream trend. He added that major game publishers are now more inclined to invest in high-quality AR titles, hoping to replicate the game's success. Spark Capital, one of Niantic’s key investors, has a long history in AR/VR. The firm also backed Oculus VR, which was later acquired by Facebook for $2.3 billion in 2014. Apple’s ARKit, Google’s ARCore, and Facebook’s Camera Effects represent major milestones in the evolution of AR. These platforms are expected to reach 900 million users by the end of next year, potentially surpassing 3 billion by 2021. However, it may take up to 12 months for mobile AR startups to see substantial revenue growth. Digi-Capital predicts that long-term leaders in the AR space might eventually reap significant rewards, though this could take until 2019. As the technology matures and adoption increases, the future of AR/VR looks increasingly promising.

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