Quantum computing is real and quantum advantage has been achieved. Quantum computers are noisy and still years away from cracking RSA encryption or curing cancer, but they can now do things in hours that would take classical computers years.
In this article, we will take a look at the 5 best quantum computing stocks that could generate incredible returns for investors over the next few years. And one quantum computing company that is still private but holds tremendous potential via photonic qubits. You know you love photonic qubits!
Quantum computers have the potential to be significantly more powerful than classical computers, which means they can solve complex problems that are currently beyond the capabilities of today’s computers. Investing in companies developing quantum computing can put you ahead of the tech curve. More than 91% of global CEOs say they’re steering cash toward quantum computing, and 70% say they’re generating real-life use cases for the technology.
Quantum computing is still in the early stages, but several advancements have been made by leading companies in the past year. A few companies are already selling quantum computers and quantum computing resources in the cloud. Some companies are reporting bookings more than doubling year over year.
Quantum Computing vs Classical Computing
There is a major difference between classical and quantum computing. In classical computing, data is known as the bit, which can be either 0 or a 1, thus giving its binary qualities. You can compare a bit to a light switch that can be either on or off. Every operation a computer performs is ultimately broken down into 1s or 0s in binary form.
But with quantum computing, qubits are used instead of bits. Qubits don’t exist in a binary state of either a 1 or 0, but can exist in any proportion of both states at the same time, which is known as superposition. Furthermore, these qubits can be entangled or invisibly connected. If one qubit is altered, the other reacts at the same time, no matter how far apart they are. This in turn allows quantum computers to process vast amounts of information simultaneously, thus leading to an enormous leap in processing power.
Quantum computing can therefore unlock new possibilities outside our reach, from modeling biological processes to optimizing supply chains, powering general artificial intelligence (AGI) models, and so on.
In the past few years, quantum computing has dramatically changed, with several companies having working yet experimental quantum computers. Online access to quantum computing is now available from Microsoft Azure and Amazon AWS. Companies are currently using these services to develop solutions to real-world problems. Quantum computers allow us to simulate the natural world, to help us improve our understanding of science to make improvements in health care, engineering and material science. In this context, quantum computer can lead us into a new age. The potential is truly that significant.
Quantum Computing Addressable Market Size and CAGR
The chart below shows some of the sectors that can benefit from quantum computing. The addressable market size is huge, as this new level of computing can benefit most industries. How large is the potential size of the quantum computer market and how fast is it expected to grow?
Estimates vary, but some expect the quantum computing sector to grow from around $800 million in 2023 to around $10 billion by 2030. The compound annual growth rate (CAGR) for the industry is estimated to be in the range of 30% of 45% over the next decade. This obviously presents an incredible opportunity for investors.
McKinsey suggests that companies deploying quantum stand to gain $1.3 trillion in value by 2035. The four industries likely to see the earliest economic impact from quantum computing are automotive, chemicals, financial services, and life sciences. Some believe that the first nation to make a major breakthrough in quantum computing could quickly gain economic and military dominance globally.
Future commercial quantum computing systems will need orders of magnitude more qubits than available in current systems. We will also need for these qubits to deliver error-free (or near error-free) results. Current quantum computers are based on qubits that are highly susceptible to noise from the environment or component imperfections, making the qubits highly prone to error.
Still, today’s noisy quantum computers can still exceed the capabilities of traditional digital computer systems in many aspects. These advances will continue with the goal of more accurate quantum gates and eventually fully fault-tolerant quantum computing. When this happens, quantum computers are expected to be exponentially faster and more powerful than current supercomputers, accelerating artificial intelligence (AI) development. Hopefully the robots are friendly.
Over the past 12 months, there has been significant progress in this arena which I believe warrants a closer look and potentially a starting position in one or more quantum computing stocks.
5 Best Quantum Computer Stocks for Investors to Consider
Here are some quantum computing companies to consider for investments, along with their approach to quantum computer:
- Microsoft (MSFT) – Microsoft is developing what are known as topological qubits, which, unlike traditional qubits used by its competitors, are designed to be both more stable and less prone to errors. IBM (IBM) and Google (GOOG) are exploring superconducting qubits. This is a two-level system with a superconducting circuit that must be kept at temperates colder than space. The temperature is close to absolute zero to maintain the delicate quantum states of their qubits. Liquid helium anyone? I am grouping these 3 together because they are all large-cap tech stocks without a pure focus on quantum computing.
- Rigetti (RGTI) is also building superconducting quantum computers. While IBM or Google can give an investor exposure to superconducting qubit quantum computing, Rigetti is the only pure-play public option for investors to get direct exposure. Rigetti has faced a shake up of management over the past year with many of the original founders leaving and new leadership taking over.They appear to be focusing on a hybrid system that uses both quantum and classical computing methods. New management also has a track record of selling companies, so Rigetti could be ripe for an acquisition by a larger play. Rigetti is is currently working on an 84-qubit machine called Ankaa. In the event Ankaa-2 reaches 99% fidelity, they anticipate focusing on scaling to develop Lyra (336q) by tiling 4 x Ankaa-2. Rigetti has a market cap around $200 million.
- IonQ (IONQ) is exploring a trapped ion approach. IonQ was founded in 2015 by two professors, Christopher Monroe and Jungsang Kim, who have been researching trapped ion quantum computing for over 25 years. Trapped ion quantum computing involves manipulating individual atoms with lasers to create and control qubits. IonQ claims its trapped ion approach has several advantages over other quantum computing technologies, such as high fidelity, scalability, networkability, and algorithm optimization. The company has developed several quantum computers with up to 32 qubits and has made them available to the public through cloud platforms. IONQ has a market cap around $3 billion.
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D-Wave Quantum (QBTS) is the world’s first quantum computing company with a commercial product. They are using quantum computing to help companies optimize operations. Some of the companies that utilize D-Wave’s quantum systems and services include Lockheed Martin, NASA, Volkswagen, USRA, USC, and Oak Ridge National Laboratory.
Quantum Annealing is the approach taken by D-Wave. Quantum annealing is an optimization process that uses quantum fluctuations to find the global minimum of a given objective function over a given set of candidate solutions. It is used mainly for problems where the search space is discrete with many local minima, such as finding the ground state of a spin glass or the traveling salesman problem. The term annealing is borrowed from metallurgy, where a material is heated and then slowly cooled to achieve a highly ordered crystal structure while minimizing defects. Quantum annealing seeks to utilize effects known as quantum fluctuations to find the best possible solution for the problem that the user is trying to solve.
On its website, D-Wave indicates that its “customers are building quantum applications for a broad spectrum of industries and use cases such as logistics, financial services, drug discovery, materials sciences, scheduling, fault detection, mobility, and supply chain management.”
- Xanadu (private) – Photonic qubits are created by squeezing laser light using wind resonators, a process that is being pioneered by Xanadu. The benefit is that the hardware does not need to be supercooled like it does in superconducting quantum computing.
Xanadu was founded in 2016 by Christian Weedbrook and was a participant in the Creative Destruction Lab’s accelerator program. Since then, Xanadu has raised a total of US$245M in funding with venture capital financing from Bessemer Venture Partners, Capricorn Investment Group, Tiger Global Management, In-Q-Tel, Business Development Bank of Canada, OMERS Ventures, Georgian, Real Ventures, Golden Ventures and Radical Ventures and innovation grants from Sustainable Development Technology Canada and DARPA.
Superconducting is scaling fastest because it uses engineered qubits that take advantage of existing semiconductor processes and technology. This approach also has created the most qubits and the lowest error rates. Superconducting was the first approach to achieve quantum supremacy or quantum advantage (the goal of solving a problem with a quantum device that no classical computer could solve in a feasible time period) when Google used it to perform a calculation that would have taken the best classical supercomputer 10,000 years to complete. Or put another way, Google’s quantum computer “instantly makes calculations that would take the best-existing supercomputers 47 years [to compute].”
Last month, scientists confidently reported the discovery of a room temperature superconductor called LK-99. This piqued interest in the quantum computing sector, because the invention of a room temperate semiconductor would have been game-changer for quantum computers and society in general. It would be an achievement on par with the discovery of electromagnetic induction or the creation of the first transistor. Unfortunately, it turned out that LK-99 isn’t living up to the hype and may not be a superconductor after all. But maybe it is still a small step forward, has brought increased awareness and communication in the scientific community and more resources will be allocated to finding a room temperature superconductor.
Best Quantum Computing Stocks
It is still too early to determine the best quantum computing stocks to invest in today because the technology is rapidly advancing with several competing approaches. Investors wanting exposure to quantum computing stocks might be best served to buy a small basket of quantum computer stocks to get diversified exposure. This could include buying one or more large-cap names such as Google, Microsoft or IBM, which have exposure to quantum computing but are far from being a pure-play. And then also purchasing one or more of the smaller-cap speculative names that are pure-play quantum computing stocks such as IonQ, Rigetti Computing, or D-Wave Quantum.
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