Even though December has just begun, Alibaba Group Holding Ltd (BABA) , Alphabet Inc.'s (GOOGL) Google, Spark Capital, Temasek Capital Ptd. Ltd., and others already bet $1 billion on AR/VR during the fourth quarter, Digi-Capital reports. It's only the second quarter when AR/VR has crossed the $1 billion threshold (the other being the first-quarter of 2016). With Apple Inc. (AAPL) , Alphabet and Facebook Inc. (FB) introducing AR platforms, the user bases and business models could take shape.

In augmented reality, a virtual image--such as a Pokémon--appears on top of an image of an actual room or another real environment. In virtual reality, the entire environment displayed on a headset or other screen is artificial.

The bulk of the funds came in two fundraisings, Magic Leap Inc.'s $502 million series D round in October and Niantic's $200 million B round in November.

Temasek, fellow Singapore fund EDB Investments Pte. Ltd., Brazil's Grupo Globo and Janus Henderson Investors, joined existing Magic Leap investors Alibaba, Google, Fidelity Management and Research Co. and others in the financing round.

Magic Leap is developing an augmented reality interface and software, but so far has no product--material or virtual--to sell you. The company was instrumental in the first quarter of 2016's AR/VR fundraising bonanza, the last time when total AR/VR funding exceeded $1 billion. Magic Leap raised $800 million in February 2016, as total AR/VR investment for the quarter came to $1.2 billion.

While Magic Leap's investments may involve a leap of faith, Niantic's Pokémon GO, released in the summer of 2016, is an actual AR/VR blockbuster. "Pokémon Go has already proved the category can be a hit, Macquarie Capital analyst Ben Schacter wrote in a note earlier this year. "Importantly, we expect the large game publishers will be more inclined to invest meaningfully to develop quality games for AR, as everyone wants their franchise to emulate Pokémon's success."

Niantic-investor Spark Capital has a track record in AR/VR investments. The firm was among the backers of Oculus VR, which Facebook acquired for $2.3 billion in 2014.

The arrival of Apple's  ARKit augmented reality platform, Google's ARCore and Facebook's Camera Effects represent an important moment in the development of augmented reality business models. 

"ARKit, ARCore and Camera Effects could have 900 million installed base by the end of next year (over 3 billion by end of 2021), but it could still take mobile AR startups another 12 months to scale in revenue terms," Digi-Capital observed.

That could set the stage for exits. "Long-term dominant players should emerge to cash in their golden augmented tickets, but that might not happen before 2019," the bank suggested.

Alphabet, Facebook and Apple are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL, FB or AAPL? Learn more now.

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