Quantum Computing Stocks Are Flying: Investors Should Brace for a Long Haul

Quantum computing is gaining momentum in the investment market, propelled by a surge in stock prices following a significant announcement from Google-parent Alphabet. On December 9, Alphabet unveiled its new Willow quantum computing chip, catapulting its shares up by 7%. However, the most impressive market reactions have been witnessed in smaller companies with a collective market capitalization of under $8 billion: Quantum Computing, Rigetti Computing, and D-Wave Quantum. These stocks have soared by an average of 159%, indicating that the sector is experiencing a moment of intense investor interest.

International Business Machines (IBM), another notable player in the quantum realm, has seen a decline in its stock price, down by 4% since the Willow announcement. There are voices in the financial community suggesting that IBM’s efforts may be overshadowed by its competitors. Ben Reitzes from Melius Research contends that “IBM thinks it is building the most comprehensive quantum solution in the world,” and he supports this assertion with evidence of IBM’s strong team and commendable progress in scaling up its quantum hardware.

The Promise vs. Reality of Quantum Computing

Despite the excitement around quantum computing technology, experts advise investors to temper their enthusiasm. Although Willow signifies important advancements, including reduced error rates, the practicality of utilizing quantum computing remains years away. According to Rob Schoelkopf, Chief Scientist at Quantum Circuits, there is a significant gap between theoretical capability and practical application. “There’s good enough, and then there’s practical,” he states, noting that “for useful computing, we need vastly lower error rates.” This delineation emphasizes the challenges that the industry still faces as it works towards the realization of quantum computing’s full potential.

Market Projections and Skepticism

Market research firm IDC estimates that total commercial sales for quantum computing will reach $8.9 billion by 2028, a figure that pales in comparison to the daily sales of products like iPhones and Google ads. In spite of this projection, some experts remain skeptical about such optimistic forecasts. Steven Girvin from Yale University comments, “I am skeptical but would be delighted to be proved wrong,” reflecting a cautious stance on the current pace of advancements in quantum technology.

Even with its bullish outlook, Melius Research clarifies that quantum computing is not expected to yield immediate revenue. The firm projects that quantum could generate multiple billions in revenue and profits for IBM in the 2030s, with a hopeful estimation for material revenue by 2029. Additionally, Ben Preskill speculates that viable quantum computers capable of running a variety of applications might still be a couple of decades away.

The Transition from Classical to Quantum Computing

To understand the significance of quantum computing, it’s essential to grasp the fundamental differences from traditional computing. Current computers utilize binary math, with chips made up of billions of transistors representing “bits” of data that can either be on or off. In contrast, quantum computers harness “qubits,” which can represent multiple states simultaneously, enabling them to process data much more rapidly. This promising technology could dramatically enhance performance for complex tasks like cryptography, optimization, and simulation.

The recent tests conducted by Google with the Willow chip, particularly in quantum memory—where it successfully stored and retrieved data in minutes that would take a classical supercomputer 10 septillion years—exemplify the potential of quantum computing to revolutionize certain applications.

Facing Limitations

Despite these advancements, the technology still grapples with significant limitations, notably the high error rates associated with qubit operations. Even though the Willow chip demonstrates progress, experts agree there are substantial hurdles yet to be overcome before quantum computing can become a commercially viable product. As Steven Girvin puts it, “I will keep saying ’10 years from today’ until I am proven wrong,” suggesting that the timeline for practical usage remains uncertain as the industry navigates uncharted territory.

Conclusion

As quantum computing stocks continue to rise, investors should adopt a cautious approach, acknowledging both the potential and the challenges of this transformative technology. While significant strides are being made, the road to commercial viability is still long, and the ultimate impact of these advancements may not materialize for years, if not decades. As the technology matures, the applications that will emerge from quantum computing remain a mystery, but the excitement and promise are undeniable.