How to invest in quantum computing stocks
(Last Updated On: 12. July 2022)
Quantum computing could be the next big thing when it comes to investments over the next decades. IBM predicts that 2023 will be the year that quantum computing will break through as an impressive source of investment but this is just a “prophecy” right now. But investors are already investing today in future technologies such as 5G, hydrogen, genetics, space economy, and artificial intelligence. Quantum computers will join this list sooner rather than later. When this happens, we may have the problem of not knowing how to invest in quantum computing. Or not investing when we should have. For this reason, this article will give you an introduction in quantum computing and an overview of quantum computing stocks to buy.
According to a study conducted by MarketWatch, the Global Quantum Computing Market was valued at around $89 million in 2016 and is projected to reach around $949 million by 2025, growing at a CAGR of 30% from 2017 to 2025. By 2028, this market is about to reach a value of around $3180 Million. According to a separate study by McKinsey, there will be an estimated 5,000 quantum computers worldwide by 2030. So the opportunities seem to be huge and forward-looking investors are already waiting in the winds. But before we continue to answer the question what quantum computing stocks to buy, let’s answer the question “What is quantum computing”.
What is quantum computing?
Traditional computers are fundamentally based on the binary principle. Everything a computer ‘understands’ and does is essentially defined by a set of binary states which is represented by 0 and 1. Now, if we look at quantum computers, things get quickly complicated, because they follow completely different rules than traditional computers. The following explanation is an oversimplification of reality but should help you to understand the basic principles (qubits, superposition, entanglement and interference).
When we speak of quantum computers, it’s no longer bits but qubits (QBits) that matter. These are made from superconductors and can assume a so-called superposition between 0 and 1. If you compare it to a coin toss, the superposition would be the ‘state’ of the coin in the air – neither heads nor tails.
This superposition between the poles allows quantum computing to express much more complex states than before. If a qubit can be in two-state superposition, two qubits can be in four-state superposition and three qubits can be in eight-state superposition. The number of possible states, the amount of possible information, grows exponentially with the number of qubits.
The second central principle is the so-called entanglement. If you entangle two qubits with each other, they can no longer be described individually because they are/become dependent on each other. As soon as multiple qubits are entangled, they behave as a coherent system.
The third principle we need to understand is interference which is a byproduct of the superposition. Essentially, the concept of interference states that particles can be in more than in one place at any given time (through superposition) but also that an individual particle, can cross its own pathway and interfere with the direction of its path. A good and detailed explanation of these phenomenons I found in the book “Quantum Theory Cannot Hurt You: A Guide to the Universe“*.
The great difficulty for quantum engineers (the programmers of the future) is to find a way to design operations and algorithms in such a way that useful results emerge from the complex states. While these peculiarities open up completely new possibilities, it’s (still) very difficult to work reliably with multiple qubits.
For this reason, the question of the ideal set of qubits that can ideally solve problems with as few errors as possible is a central problem. If you now want to build a quantum computer, you have to produce qubits that behave like artificial atoms, at least that is how it is currently done. These qubits are stored in the quantum computer (extremely) cooled to minimize the energy in the system and thus maintain control. In order to ‘communicate’ with the qubits, microwaves are used, with which the states can be changed in a targeted manner.
Where would be the most impact of quantum computing?
The impact and thus the benefits are distributed across very important industries. The ability of quantum machines to process information and data at a very exponential rate while using very little energy is what makes these machines such impressive. With this in mind, quantum computing will have a tremendous positive impact in the following areas and/or industries:
Logistics, military, pharmaceuticals (drug design and discovery), aerospace (design), utilities (nuclear fusion), financial modeling, chemicals (polymer design), artificial intelligence (AI), cybersecurity, failure detection, big data, capital goods and especially the digital production.
The foreseeable advantages of using quantum computers can already be seen across the economy: resources are used more sparingly, medicines are developed faster and material properties in chemistry are predicted at the smallest level. In any case, investors are already counting on these new types of computers. Around 200 million dollars of venture capital has flowed into start-ups every year before 2020. In 2021, it was already more than $1 Billion.
Of course, the industry is still very young, the sales are modest, and you shouldn’t expect quantum computing stocks skyrocketing in the near future. But nevertheless, private investors should gradually consider investing in the age of quantum computers at an early stage.
What nations are investing in the development of quantum computing?
It is on record that China is one of the leaders (or maybe already a leader) in quantum computing. Already in 2016 it launched a quantum satellite. Since then, some other nations have followed realizing the importance of quantum science. Nations like the United States, Germany, Russia, India and the European Union. Just a couple of examples:
- The interest in quantum has been considered in the United States such important that it flowed into the National Quantum Initiative Act which was signed in late 2018. This act mandates spending $1.2 billion on quantum science over the next five years.
- The Government of India has committed $1.2 billion in its 2020 budget to support quantum computing projects over five years in the “National Mission on Quantum Technologies & Applications”, while Europe launched in 2016 a €1 billion initiative to fund the entire quantum value chain in the next ten years.
- In October 2019, the first prototype of a quantum computer was launched in Russia, while in Germany, the Fraunhofer-Gesellschaft, Europe’s leading applied research organization, has partnered with IBM for advanced research in the field of quantum computing. IBM plans to install its “Q System One” quantum computer near Stuttgart in 2021.
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Quantum Computing Stocks to Buy in This Decade
While the industry is still young, the hardware industry related to quantum computing will grow at an impressive rate the more the development and the demand for quantum computers would increase. There are countless ways to use quantum computers. Some potential applications include improved batteries and carbon capture technologies, early stage research and development to create newer, more efficient medicine, improved risk analysis for banks, pricing of complex derivatives, improving cybersecurity, and developing smarter vehicle routes, among others.
IBM – With quantum computing towards the former greatness?
IBM was one of the first major private sector players in quantum research. In 2020, the US group already deployed 28 quantum computers in operation. IBM is currently working with 119+ partners to develop applications for the real world. And IBM has already announced the next quantum computer called “Quantum Condor” for 2023.
Quantum computers as a sales driver will definitely become more and more important for IBM in the future: In the fourth quarter of 2020, the US group recorded a decline in sales for the fourth time in a row. The lucrative cloud business with IT services and storage space on the Internet has recently grown much more slowly. In the traditional hardware core business with servers and mainframes, the direction has been pointing downwards for a long time. However, this state of affairs is favorable for investors who believe that IBM will play a significant role in the quantum computing market.
Alphabet – declared quantum supremacy
While IBM impresses with its progress in quantum computing, we can’t for sure ignore Alphabet and the impact they have made in quantum computing. Their stock remains one of the top stocks in quantum computing to buy. The company announced quantum supremacy back in 2019 when its quantum computer outperformed conventional devices at certain tasks. Alphabet’s “Sycamore” quantum processor completed a specific task in 200 seconds that would take the world’s best supercomputer 10,000 years to complete. This is a huge milestone and the company continues to advance quantum physics.
To accelerate this progress and to secure market shares, Google unveiled its Google AI Quantum lab. It develops new quantum processors and algorithms to solve a variety of problems. It also provides open sourcing for some of its frameworks to encourage innovation.
This superiority is gradually attracting interest in the pharmaceutical industry as well. In January 2021, for example, the German pharmaceutical company Boehringer Ingelheim entered into a partnership with Google to research new possible applications for quantum computers in pharmaceutical development. The US technology company is determined to pursue this technology further.
Intel – a unique concept with its silicon spin qubits
Another company that has shown promising results in quantum computing is Intel. This semiconductor giant develops many cutting-edge technologies, and it makes quantum processors in Oregon. In 2018, Intel was in the third generation of quantum processors with 49 qubits. But the company is taking a unique approach, advancing a technology known as “spin qubits” in silicon.
A silicon spin qubit has roughly the size of a transistor (which is measured in nanometer scales), making it about a million times smaller than a superconducting qubit (which is measured in millimeters). This factor alone creates a competitive advantage, especially with the targeted large qubit numbers of over 1000 in the next years. Studies have also shown that silicon spin qubits are stable at temperatures above 1 degree Kelvin (-272,15 Celcius or -457,87 Fahrenheit) which is not the case with superconducting qubits. In 2020, Intel introduced its 128-qubit quantum chip called Horse Ridge.
Therefore, in my opinion, Intel belongs to one of the quantum stocks to buy. For buying into this company gives investors access to many cutting-edge technologies but also an alternative because of Intel’s different approach to quantum computing.
Microsoft – more than just Windows
Similar to IBM or Alphabet, Microsoft is taking a comprehensive approach to quantum computing. It works on all the technologies needed to scale commercial applications. This includes the quantum computer, the software and the development tools. Microsoft also launched the Azure Quantum open cloud ecosystem. This free access to the ecosystem shall accelerate innovation and drive adoption. Among others, the car manufacturer Ford relies on the platform to tackle the global problem of traffic congestion. The risk of buying shares is manageable as Microsoft is profitable even without quantum computing, as we know.
Amazon – more than just parcels
Amazon Quantum Solutions Lab helps companies to identify opportunities, and Amazon experts work with customers for a better understanding of quantum computing. This helps them to build new algorithms and solutions. Amazon is now offering quantum computing on Amazon Web Services through Amazon Bracket to accelerate the research of quantum computing. This service provides access to D-Wave hardware. D-Wave is one of the leading quantum computing companies based in Canada (More information about D-Wave you will find below). Overall, Amazon continues to disrupt many industries, and the advancement of quantum computing should help to drive its innovation even further.
Toshiba – pioneer in quantum cryptography
The Japanese company Toshiba is also involved in the quantum field. Toshiba relies primarily not on quantum computing hardware but on quantum cryptography. The company is seen as a pioneer there. This involves the encryption and transmission of information. To put it simply: Toshiba wants to make future data traffic secure, even in the age of quantum computers. By 2030, Toshiba wants to generate $3 Billion in revenues from cryptographic technology. If you want to know more about Toshiba’s quantum cryptography project, you can check the article I found on the website of analyticsindiamag.com.
IonQ – First pure quantum investment on the stock exchange
The US company IonQ is developing a quantum computer in the size of an Xbox*, and it’s a pure-play company in quantum computing while the other companies have it as one part of their product portfolio. The device should be fully developed in 2023, but around 20 million software developers already have access to it. Until October 2021, investors could only invest in IonQ through the shell company dMY Technology, in which Dell founder and CEO Michael Dell also has a stake. But now, IonQ is traded on the New York Stock Exchange. IonQ President and CEO Peter Chapman told Bloomberg in early April that access to the capital market was the main reason for the IPO, while also explaining why the scale of the upcoming changes caused by quantum computing is unimaginable. Check out the interview here, folks:
Quantum Computing Inc. – the next pure-play in quantum computing
Quantum Comptutinc Inc. (or just QCI) is developing a software-as-a-service (SaaS) quantum computing solution called “Qatalyst”. According to QCI, Qatalyst shall help to solve complex mathematical computations quickly and deliver high-quality results. Currently, it’s still an early pre-revenue company producing losses. Therefore, QUBT is a pretty risky speculative buy. But as I see potential here, it’s worth to set this company either onto the watch list or at least to buy a very small allocation of its shares.
Rigetti – A pioneer of full-stack quantum computing
In 2021, Rigetti announced the launch of the world’s first multi-chip quantum processor. Since its IPO as a SPAC in 2021 and morphing to a publicly traded company in 2022 under the ticker RGTI, Rigetti has caused a lot of excitement in the world of investors. According to investor David Cowan, Rigetti has the opportunity to rise to one of the massive tech companies in the world. The company is planning to develop its quantum computers of its Aspen-9 system to 1,000 qubits in 2024 and to 4,000 qubits in 2026.
At this moment Rigetti doesn’t generate positive income and that’s why this company has huge potential on the one hand but it’s also a risky investment on the other hand. But I guess, it’s with all growing companies the same, right?
Check out the promo video of Rigetti, folks:
Quantum Computing ETF
Yes, there is also an quantum computing ETF available. The ticker of this ETF is QTUM, and it was issued by Defiance ETFs. The underlying of this security is called BlueStar Quantum Computing and Machine Learning Index (BQTUM). It tracks around 71 globally-listed stocks across all market capitalizations.
So if you’re ETF friendly, you could check this one whether is a suitable investment for you, folks.
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Quantum computing companies you cannot invest right now in terms of stocks
The companies I presented above are, of course, not the only ones engaging in quantum computing. There are several companies are not traded publicly or just at the stage of an start-up. But it’s for sure worth to keep an eye on them to track their development and to take the opportunity when they go public. That’s why I’d like to introduce a couple of them:
D-Wave Systems – another pure-play in quantum computing
D-Wave Systems Inc. is a hardware manufacturer headquartered in Burnaby, British Columbia, Canada. The company was founded in 1999 and became known on May 11, 2011 for developing what it claims to be the first commercial quantum computer. After June 2022, it’s expecting to going public and will be traded on the NYSE under the ticker symbol QBTS. It will also change its name from D-Wave Systems to D-Wave Quantum Inc. as it will merge with the SPAC company called DPCM Capital which is actually traded on the NYSE under the ticker symbol XPOA.
Check out their promo video, folks:
Xanadu Quantum Technologies – quantum computing in the cloud
It’s a start-up from Toronto, Canada, which was founded in 2016. This company provides photonic quantum computing and AI technology services as well. Also, it offers quantum computer production, quantum silicon photonic chips designing, open-source software development, and machine learning platform for quantum computers. In January 2022, it got a deal with the drug design company “Menten AI” to develop a concept of quantum machine learning with the purpose to accelerate the research in protein-base drug discovery.
Quantinuum – Honeywell wants a part of the cake, too
It’s a merger of Honeywell Quantum Solutions and Cambridge Quantum, and it’s expected to go public by the end of 2022. The new company employs around 400 people in offices across the United States, United Kingdom, Europe and Japan. Quantinuum’s first product will offer a new kind of cybersecurity solution but also some other solutions for drug discovery, finance, material science, etc. Quantinuum is a stand-alone company, but Honeywell will be the largest shareholder with an approximately 54 percent ownership. So let’s lean back and see what happens in the next future. Will this one make it..?
Alice & Bob – On the mission of an ideal quantum computer
It’s a pretty young start-up from Paris, France, which was founded in 2020. Alice & Bob builds quantum computers, or to say with their words: “…building an ideal Quantum Computer”. At the beginning of 2022, this start-up could raise around $30 million (€27 million) to develop chips, computers and a business model based around quantum-computing-as-a-service to be launched in 2023.
Check the promo video of Alice & Bob:
Polaris Quantum Biotech – Drug blueprints with quantum computers
Another young start-up from Durnham (NC), USA. It was founded in 2020 and its mission is to produce up to 100 drug blueprints per year. All this shall be achieved by using quantum computing combined with AI and Precision Medicine performing protein targeting simulations.
To get more information about Polaris, check out this interview Dr. Shahar Keinan, the Co-founder & CEO:
For the sake of fairness – disadvantages of quantum computers
- One of the disadvantages of a quantum computer is that it’s not deterministic. The correct result of a calculation or a process can have a higher measurement probability than the others, but their probabilities do not have to drop to zero. The measured result can therefore be wrong, which is why the process has to be repeated until you are sure that you have the correct result.
- Another disadvantage of quantum computers is that due to their incomparable computing power, all currently used encryption mechanisms would be useless overnight. Secure communication or any type of transaction over the internet could be cracked and the data misused or resold. Many crypto currencies would also no longer be safe and anonymous. To prevent this from happening, researchers are already working on so-called post-quantum cryptography (like Toshiba). With new methods, secure communication should also be possible in the future.
- A quantum computer is only stable when many qubits are connected (entangled) with each other.
- Quantum computers are sensitive creatures – superposition is not easy to maintain and the computer only runs at temperatures close to zero point.
- These devices do not appreciate vibrations.
- The entanglement of the qubits enriches, but also complicates the handling of the individual as well as the totality of the particles.
Quantum computing is not omnipotent. And it’s not generally faster than a classic computer. But it is particularly suitable for special applications where common properties of many input values have to be searched for or which can be solved by trial and error.
Thus, quantum computing is already about to begin to disrupt industries. As the top companies but also start-ups continue to innovate and to develop, this technology will become more powerful and accessible, paving the way for benefits.
By 2030, there could be around 5000 quantum computers worldwide. Seems to be a tiny amount compared to billions of classic devices like laptops, PCs, smartphones, tablets, smart TVs, etc. And I don’t expect to see a quantum computer for final consumers available in the next 10 years. Maybe in 20 years… But even with 5000 quantum computers for broad industrial and science purposes, imagine what is possible in terms of acceleration of inventions? Quantum computers have the potential to revolutionize (at least industrial and scientific) computation by making certain types of hard to problems solvable. So what impact could it provide for you as investor?
Disclaimer: This information is neither an investment advice nor an investment strategy or investment recommendation. The information I am giving you in this article is for informative purposes only. The information presented would not be suitable for investors who are not familiar with securities. Any readers interested in trading or investment activities related to the information in this article should do their own research and seek advice from a licensed financial adviser. The securities are products that are not simple and can be difficult to understand. This information contains information that relates to the past. Past performance is not a reliable indicator of future results.