A week in Xbox VR with Microsoft and Meta's new $399 headset
I've been using the Quest 3S Xbox Edition over the past week, and I was surprised to see that Meta has actually tweaked its Quest setup process to incorporate the carbon black and green styling of this headset and controllers into the UI. This Xbox Edition VR headset is even pre-paired with the Xbox controller and boots directly into the Xbox app.
The Xbox app on the Quest 3S Xbox Edition is the same one found on other Meta VR headsets, and it lets you stream games from Xbox Cloud Gaming. You'll need an Xbox Game Pass Ultimate subscription to do this, but Microsoft has thrown in a three-month code that works for new and existing Game Pass subscribers.
I played a variety of games on this headset, both in the immersive Xbox app experience with a 26-foot virtual display and in the pass-through view that turns an Xbox game into an augmented reality object that sits in the real-world environment around you.
I liked the ability to curve or flatten the virtual display, but I found the fully immersive display showed off some of the flaws of Xbox Cloud Gaming's low bitrate and resolution. Forza Horizon 5 looked a little blocky at times, but I never experienced much noticeable lag while playing games.
The hardware itself is very much just a custom colorway, with a green band around the front of the VR headset and a little green Xbox logo on the side. The Xbox controller has that same black and green styling, which also extends to Meta's own Touch Plus controllers. It all matches surprisingly well.
Naturally, Microsoft will market this as an 'Xbox' in the same way that it calls laptops, TVs, and phones an Xbox if they're capable of streaming games from Xbox Cloud Gaming. Microsoft has never done an Xbox VR headset, and this is clearly as close as we're getting to one.
I think this type of 'Xbox' makes sense if you don't want to lug a heavy console on vacation or have to worry about attaching a screen. It's really all in a single package, but you'll need to pay that monthly $19.99 subscription fee for Game Pass Ultimate. This really would be more appealing if Microsoft finally launched its long-rumored dedicated cloud gaming subscription or even a free ad-supported version that it has hinted at in the past.
Meta and Microsoft are launching the Quest 3S Xbox Edition in the US and UK today. It will be available on Meta's online store and in Best Buy in the US, or Argos and EE in the UK. 'Quantities are extremely limited,' warns Lori Wright, corporate vice president of gaming partnerships at Microsoft. 'Once they're gone, they're gone.'
Photos by Tom Warren / The Verge
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For more on this discussion, read: 🤨 and 💪 AI investment is officially the dominant growth story 🤖 AI has been a hot story for about three years. And the buzz only seems to be heating up. Check out this chart from Luke Kawa at Sherwood News. It tracks analysts' estimates for AI capex by the major hyperscalers: Microsoft, Alphabet, Amazon, Meta, and Oracle. The curve suggests the investment spending is accelerating. AI capex spending by the hyperscalers has been heating up. (Source: Sherwood) And just how big is the AI capex story in the context of the economy? Renaissance Macro's Neil Dutta caught this incredible development in the most recent GDP report. "So far this year, AI capex, which we define as information processing equipment plus software, has added more to GDP growth than consumers' spending," Dutta said. AI capex is contributing more to GDP growth than personal consumption. (Source: Sherwood, Renaissance Macro) What's so impressive about this is how small AI capex is in the context of the economy. "The U.S. consumer makes up about 70% of the economy," Sherwood's Kawa noted about the stats. "Over the long term, that's been the undisputed engine of growth. But these two segments that make up 6% of GDP have been playing a bigger role in fueling the expansion so far this year, on average." In other words, a relatively small slice of the economy is growing so fast that it's become the dominant growth story for the whole economy. Review of the macro crosscurrents 🔀 There were several notable data points and macroeconomic developments since our last review: 👎 Inflation expectations heat up. From the New York Fed's July Survey of Consumer Expectations: "Median inflation expectations in July increased at the one-year-ahead horizon to 3.1% from 3.0% and at the five-year-ahead horizon to 2.9% from 2.6%. They remained steady at the three-year-ahead horizon at 3.0%." (Source: NY Fed) The introduction of new tariffs risks higher inflation. For more, read: 😬 ⛽️ Gas prices tick higher. From AAA: "Gas prices fluctuated slightly this past week with the national average for a gallon of regular going up by two cents to $3.16. Crude oil prices are hanging in the mid $60s per barrel, keeping pump prices steady. Supply remains abundant, as OPEC+ — a group of oil-producing countries — recently announced it will be boosting production again next month, following several other increases this year." (Source: AAA) For more on energy prices, read: 🛢️ 🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.63% from 6.72% last week. From Freddie Mac: "The 30-year fixed-rate mortgage dropped to its lowest level since April. The decline in rates increases prospective homebuyers' purchasing power, and Freddie Mac research shows that buyers can save thousands by getting quotes from a few different lenders." (Source: Freddie Mac) There are 147.9 million housing units in the U.S., of which 86.1 million are owner-occupied and about 39% are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to the small weekly movements in home prices or mortgage rates. For more on mortgages and home prices, read: 😖 🏭 Business investment activity deteriorates. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — decreased 0.8% to $75.4 billion in June. (Source: Census via FRED) Core capex orders are a leading indicator, meaning they foretell economic activity down the road. For more on deteriorating economic metrics, read: ⚖️ 💼 New unemployment claims remain low — but total ongoing claims are up. Initial claims for unemployment benefits rose to 226,000 during the week ending Aug. 2, up from 219,000 the week prior. This metric remains at levels historically associated with economic growth. (Source: DoL via FRED) Insured unemployment, which captures those who continue to claim unemployment benefits, rose to 1.974 million during the week ending July 26. This metric is near its highest level since November 2021. (Source: DoL via FRED) Steady initial claims confirm that layoff activity remains low. Rising continued claims confirm hiring activity is weakening. This dynamic warrants close attention, as it reflects a deteriorating labor market. For more context, read: 🧩 and 💼 💪 Labor productivity increases. From the BLS: "Nonfarm business sector labor productivity increased 2.4% in the second quarter of 2025 … as output increased 3.7% and hours worked increased 1.3%. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From the same quarter a year ago, nonfarm business sector labor productivity increased 1.3% in the second quarter of 2025." (Source: BLS) For more, read: ⚙️ 🤑 Wage growth is cool. According to the Atlanta Fed's wage growth tracker, the median hourly pay in July was up 4.1% from the prior year, down from the 4.2% rate in June. (Source: Atlanta Fed) For more on why policymakers are watching wage growth, read: 📈 💰 Household finances could be better, but are mostly normalizing. From the New York Fed's Q2 Household Debt & Credit report: "Transition into early delinquency held steady for nearly all debt types except for student loans. Student loans saw another uptick in the rate at which balances went from current to delinquent due to the resumption of reporting of delinquent student loans. Transitions into serious delinquency were mixed across debt types: auto loans and credit card debt were largely stable, mortgages and HELOCs edged up slightly, and student loans rose sharply." (Source: NY Fed) While the rate at which debt is entering delinquency has increased, the total amount of debt in delinquency remains low, at just 4.4% of outstanding debt. (Source: NY Fed) And while credit card debt balances often steal headlines, it's a mistake to say consumers are maxing out their credit cards. The $1.2 trillion in credit card balances as of Q2 represents just a tiny fraction of credit card limits. (Source: NY Fed) For more on household finances, read: 🛍️ 💳 Card spending data is strong, but could be driven by "buyahead" before tariffs. From JPM: "As of 31 Jul 2025, our Chase Consumer Card spending data (unadjusted) was 3.3% above the same day last year. Based on the Chase Consumer Card data through 31 Jul 2025, our estimate of the US Census July control measure of retail sales m/m is 0.61%." (Source: JPM) From BofA: "Total card spending per HH was up 3.0% y/y in the week ending Aug 2, according to BAC aggregated credit and debit card data. Online retail saw the biggest y/y spending gain while entertainment saw the biggest drop vs last week, across our categories. The significant rise this week could be buyahead before the Aug 1 tariff deadline/early month volatility." (Source: BofA) For more on sales being pulled forward ahead of tariffs, read: 🤔 🤷🏻 Services surveys could be better. From S&P Global's July Services PMI: "July's expansion was driven by surging demand in the tech sector alongside rising financial services activity, the latter linked to improving financial conditions fueled in turn by recent stock market gains. However, falling exports of services, which includes spending in the US by tourists, acted as a drag on growth alongside subdued demand from consumers more broadly." (Source: S&P Global) ISM's July Services PMI signaled the sector was just barely growing. (Source: ISM) Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data. For more on interpreting soft sentiment data, read: 🙊 🏢 Offices remain relatively empty. From Kastle Systems: "Peak day office occupancy was 63.5% on Tuesday last week, down 1.4 points from the previous week. Occupancy fell most days of the week in all 10 tracked cities, as workers took time away from the office across the country. The average low was 34.2% on Friday, down nine tenths of a point from the previous week." (Source: Kastle) For more on office occupancy, read: 🏢 📈 Near-term GDP growth estimates are tracking positively. The Atlanta Fed's GDPNow model sees real GDP growth rising at a 2.5% rate in Q3. (Source: Atlanta Fed) For more on GDP and the economy, read: 📉 and 🤨 Putting it all together 📋 🚨 The Trump administration's pursuit of tariffs threatens to disrupt global trade, with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get more clarity, here's where things stand: Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices. Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, although cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — shifted its focus toward supporting the labor market. But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less "coiled" these days as major tailwinds like excess job openings and core capex orders have faded. It has become harder to argue that growth is destiny. Actions speak louder than words: We are in an odd period, given that the hard economic data decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continues to grow and trend at record levels. From an investor's perspective, what matters is that the hard economic data continues to hold up. Stocks are not the economy: There's a case to be made that the U.S. stock market could outperform the U.S. economy in the near term, thanks largely to positive operating leverage. Since the pandemic, companies have aggressively adjusted their cost structures. This came with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth. Mind the ever-present risks: Of course, we should not get complacent. There will always be risks to worry about, such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, and cyber attacks. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets. Investing is never a smooth ride: There's also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect as they build wealth in the markets. Always keep your stock market seat belts fastened. Think long-term: For now, there's no reason to believe there'll be a challenge that the economy and the markets won't be able to overcome over time. The long game remains undefeated, and it's a streak that long-term investors can expect to continue. A version of this post first appeared on Sign in to access your portfolio
