In this podcast, Motley Fool analyst Tim Beyers and engineering manager Tim White discuss the transition to quantum computing, investment opportunities in the budding space, and why subatomic particles are like kindergarteners.
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This video was recorded on Sept. 29, 2024.
Tim White: I think what my prediction was, is that we will see the benefits of these quantum adjacent technologies. The picks and shovels that are being built to try to build quantum computers, those will find their way into our world well before actual quantum computers will. I think that is great and is historically precedented. We've had many things where we developed a technology in order to do something else, and that technology itself was then useful microwaves and microwave up.
Mary Long: I'm Mary Long, and that's Tim White, a techie here at the Motley Fool. He and Tim Beyers are co-hosts of this Week in Tech, a show on Motley Fool Live. Our members-only video hub. Last week, Tim and Tim went to Denver Startup Week, where they heard from founders who are building a bunch of big things out here in the Mountain West. They went to one standout panel that was all about quantum computing, and that spotlighted a number of companies that are working to build the foundation for a quantum-based future. In today's show, Tim and Tim give us a primer on quantum, what it is, how it's being built, and where interested investors might look to get involved early on.
Tim Beyers: Fools, welcome to this week in Tech on Motley Fool Money. Here's Tim White, I'm Tim Beyers, and we had Tim, what I would say, was one of the most interesting experiences of, I don't know if we could call it a conference, it was certainly some talks that we went to at Denver Startup weeks. The one that we went to about Quantum was fascinating on multiple levels. Before I kick it to you here, I would say the thing that really blew me away, Tim is how much investment not just is going into quantum here in Colorado, but how much a building is happening around quantum in Colorado and theoretically well beyond, but a lot of it's happening here in Colorado. What's the number 1 thing that you saw from that quantum session that really blew your hair back?
Tim White: I think the number one thing I took away from the quantum computing segment at Denver Startup Week that we went to was that quantum is the most exciting thing that is happening right now. [laughs] Certainly in Colorado, and really well beyond what even we've been talking about in terms of AI and LLMs, the whole idea of fundamentally changing our computing capability at the core level is just super exciting. I think the second part of it was all of the quantum computing adjacent technologies that are being created as the picks and shovels of this next generation of computing.
Tim Beyers: We should talk about that. But let's start with the fundamental things we heard. Just to put a very big number on this, what the people on stage that we were hearing from estimated is that there is roughly $3.5 trillion worth of value that is out there to be captured in quantum and quantum computing, and we haven't even scratched the surface for what we can do to capture that value. Some of this comes down to, and we'll need to talk about what quantum really is here, but this idea that we could take what we know about the existing silicon-based computing model, and exponentially increase.
By exponentially, I mean, orders of magnitude exponentially increase the volume of capability for processing, handling, computing, sharing data, and to describe our world in ways that we can't even fathom, and that if we tried to point a traditional supercomputer, these problems, we might not have enough lifetimes to actually get a real answer. But with quantum, we might be able to get those answers and might be able to get those answers much sooner than we might think. Let's talk a little bit about what it is. Why can this happen? What are we talking about when we're talking about quantum computing, and then maybe we could talk about a little bit of what we saw?
Tim White: Sure. Traditional computers that we're familiar with, silicon-based computers that are binary-based, they operate in the world of ones and zeros, and they were initially created with essentially what amounts to light bulbs, vacuum tubes that were either on, or they were off. It was quite easy to measure whether they were on or off because you could see that they were on or they were off, they were either giving you light or they weren't. Then we essentially have spent the last 50, 60 years miniaturizing that same idea of having a piece of silicon that is either physically, and permanently in a zero state or one state, it's either on or off.
Then we build up a whole bunch of infrastructure on top of that. Logic gates, the word gate is going to come up a lot today, and other pieces of technology that allow us to combine all those ones and zeros in infinite numbers of ways, and then stand on the shoulders of giants, who over the last 50 years have developed all of the software that takes that ability to have ones and zeros in those states and turn it into everything that we're doing today, including large language models, and even hearing this podcast.
Tim Beyers: When we talk about that idea of being able to essentially switch something on or off, zero or one, a bit is a zero or one, and that is the foundational element. This goes back to Claude Shannon and the original design of computing systems. These are fixed systems. What's interesting about quantum, if we're talking about it, specifically and the things we're talking about, they don't exist in the same way, they exist in an entirely different subatomic space that is far more variable that allows some of this exponential compute that we might unlock if we get this right. We're going to talk about some things that we heard at Denver Startup Week about refrigeration, and atomic clocks, and other such things. But before we get to that, let's talk about what are we talking about when we talk about at this basic level, what quantum is in cubits.
Tim White: If we imagined the idea of a light bulb that's either on or off or a switch that is physically up and physically down, when we go zoom in down to the literal quantum realm, we are instead looking at the chances that an atomic particle is going to be closer to one or closer to zero. Now, you might think, does that mean it's a ruler, it's somewhere between zero, one along a line? Yes, but also it's in 3D space. If you imagine a basketball where the top is one and the bottom is zero, it's not just somewhere vertically between the zero and one, it's also somewhere in that sphere, and it's in motion, it's moving.
It's not just hanging out at this particular spot in there, so you could say it's a position 6, 3, 7, like in a X, Y, Z coordinate space. Instead, because it's moving, you have to really represent all of this in terms of probabilities. What is the chance when I measure it, when I go in and try to say, hey, where are you at, that it is in any particular spot that is closer to that one at the top or closer to the zero at the bottom. The way that I'm imagining this, and every time I think of some atomic particles, for some reason, I think of hordes of kindergartners. I don't know why, this is the analogy that always comes to my mind.
Tim Beyers: They're running around, screaming and crazy. That's kindergarteners.
Tim White: Exactly. Crazy kindergartners on the playground. Imagine there's a nice, round, perfect hill, and they're running around on that hill as fast as they can in every direction up and down the hill and around the sides and going wild. At any given moment, you slam a gate down in front of them that has two entrances, a zero or one. They're running wildly around this hill, you slam the gate down. They're just going to go through whatever door is closest to where they're at. That door again, this is all subatomic. This door is super tiny and created by essentially magnetic fields and lasers. But essentially that gate slams down, they pick one of those two doors that they're closer to and go through it. That's why they often say the qubit, a quantum bit, as you imagine normal computers that we're familiar with use bits to represent zero or one.
This quantum bit represents somewhere in that sphere between zero or one in 3D space in motion. You slam the gate down, it goes through one or the other, and at that moment, you're like, you're a one. But if you measured it a microsecond earlier, it might actually have been closer to zero because it's in motion. That's the key here is that it lets you represent things with a single bit that is not just zero or one fixed, but an infinite number of spots between zero or one in 3D space in motion. There's another piece of this that is called entanglement that we'll get to next.
Tim Beyers: The unlock here is that there are so many variables and so many possibilities inside of quantum space. I'll just call it quantum space, I'm not sure that that's actually accurate, but quantum space, there's so many possibilities here, and so you are building a probabilistic system. Funny enough I would say Quantum is the most interesting technology, but it's certainly the most interesting technology we're really not talking about. The most interesting technology we are talking about, which is artificial intelligence, AI and particularly generative AI, generative AI is what?
Tim White: It is a probabilistic system.
Tim Beyers: It's a probabilistic system, it is making predictions around the next word. If I understand it correctly, Tim, an entanglement is something that's going to help us maybe get better at making predictions, but inside of that quantum space system, what we're doing, at a hardware level, we're making predictions about what the qubit is going to choose, is it going to choose a zero or one, by virtue of slamming down these gates. But our work is entirely based on, let's predict where the qubits are going to be and where they're going to go.
Tim White: Then Part 2 of that is once you get to the point where you can predict where they're going to go, assuming you're not interfering with them, you then start interfering with them. You might start putting some obstacles in their path so that they go one way or another at that particular part of the hill. Over there, they're going to run around it this way. But on another part of the hill, you might put a different interference in the path. Then where entanglement comes in is because kids are inherently cliquish and do what the others do. Quantum bits are this way as well, where they become entangled with each other, and so once one of them starts wearing baggy pants, they are all wearing baggy pants.
The trends are there, and as soon as you change the pants on one of them, it immediately changes the pants on another one. This is where quantum entanglement and what we call spooky action at a distance comes from. Even if the kid is on the other side of the hill and cannot see you, if you change the pants on one, it immediately changes the pants on the first one because they are forever entangled once they have become so.
Tim Beyers: This creates a lot of really interesting possibilities. You can see that there is a wide variety of variables that you could account for address, and so this makes Quantum computing infinitely more interesting, scalable, you have exponential compute, if done well. But let's move into what we heard here, Tim, at Denver Startup Week, which is, what are all the things that we need to do in order to make this stuff work? Let's start with refrigeration because there's a company, great presenter at this panel we went to, the CEO and founder of Maybell. I'm oversimplifying here, so you're going to have to maybe put a little more framing around this Tim, but essentially, they make refrigerators.
They essentially put qubits in an environment that is a fraction above absolute zero. They do that in order to take these crazy children and slow them down. They're hyperactive, they're on a sugar high, we need to pump some really cold air in there and get them close to nap time, we need to slow them down. Once we do that, then we can start maybe creating some of these manipulations. But why don't we talk about this a little bit more and then other things we saw that are part of the infrastructure buildout for Quantum?
Tim White: The key feature of quantum computers, as we currently imagine them is refrigeration and it is a wild refrigerator, it looks like a steel that you might find in a Hillbilly facility. Essentially, it is using two different helium isotopes to do what your air conditioner does, except do it to a point where it is literally atomic particles are barely moving, so that A, when we put the gate in front of them, we can actually see that and measure it, and B, it reduces interference a lot. Interference, meaning, like, there's other stuff happening outside the hill there that is affecting their behavior, and if that's happening, then you can't use your obstacles that you're putting in your place to predictably manipulate them.
You really need to reduce all that interference from things like background radiation and gravity and other things that are interfering with those particles. That refrigeration is a key. There's lots of quantum computers. Some of them use superconductors to do stuff in radio frequencies to manipulate them. Maybell Quantum also builds these radiofrequency harnesses that lets you communicate with your qubits over radio frequencies more easily. But the other company that we heard about at the conference was Octave Photonics, and they are building photonic-integrated circuits.
You imagine a typical integrated circuit, like the chips in your computer, uses electricity to move things around, and it's basically plumbing inside there for electricity. These optical or photonic ICs are doing that except with light. When you look at them, they have tons of tiny little fiber optic filaments coming in and out of them. And then inside there, there's amaze of pathways that the laser light is traveling among. That is how you essentially plum your quantum computer that uses photons, which is another very common way of doing quantum computers.
Tim Beyers: I want to point out that what's so incredible about this is, so going all the way back to really, let's say the 1970s. Let's be generous and say the 1970s. What you had is silicon as a conducting element that is conducting electricity. Then, when we want to move things around on what is essentially a motherboard, we want to send electrical signals in order to move ones and zeros and compute things, we're using copper wiring. We have silicon as a conducting material, then we have copper wiring on a motherboard. What we're talking about here is, fiber, little fiber, not even cabling, fiber optic filaments that are essentially using freaking laser beams that are moving qubits back and forth in as predictable a fashion as can be achieved, knowing that there's no such thing as perfectly predictable in a probabilistic system.
Tim White: This is essentially how you communicate with your qubits from the outside world and how you have your qubits communicate with each other in the manipulating them. The key is that they also can communicate with each other using that entanglement, which we don't exactly know how it works, but they do do it, and it is extremely reliably predictable that they will do that. So that is the interesting stuff but there's also atomic clocks. You might have heard that phrase been around for a long time. But one of the companies that we heard from is a company spun out of the University of Colorado at Boulder that is called Mesa Quantum, and they are building super tiny like size of your pinky nail, atomic clocks. Why is this interesting? Because keeping track of time is essential to navigation. If you imagine the global positioning system, it is a bunch of satellites, each of which has a atomic clock in it. Then you are using your GPS device to measure the time difference coming from all those satellites and seeing that difference gives you information about your position. But if you can have those atomic clocks on your person or have them in a group of people, you can use those time differentials on a microscale to navigate without having to have satellites, which is important because GPS is easily interfered with, hacked, spoofed and otherwise destroyed. That is why it's super interesting to both commercial and military purposes to have tiny atomic clocks that you can use for navigation.
Tim Beyers: So let's talk about what we're seeing in terms of the business landscape here. These are a handful of start ups that were on this panel, but there is a lot of investment that is happening here in Colorado. But what was super interesting to us is that those investments are happening in relatively small amounts. In some cases, in the six figures, five figures, maybe some, a couple of million. The return on the dollars being invested right now is really quite extraordinary, just in terms of the building of things, Tim. That's what I heard. We're not seeing big investment returns yet, in order to, these are very sophisticated products, but I find it very encouraging. And this is one of the reasons why I think we wanted to do this segment. So like the refrigeration, for example, even though it looks like a moonshine still, and it is a very sophisticated piece of equipment at its base level, and Corbin, the CEO, was very clear about this, you're talking about bending metal, really. There's certainly some things that are sophisticated here, but it's not creating a large language model where you might be burning through 150 million, 300 million, $500 million to create an LLM that's going to be useful for 6-18 months. We're talking about bending metal, bending steel to create a refrigeration system that a lot of people with skills can do. I find that this infrastructure buildout with carefully applied amounts of capital is super interesting and encouraging, Tim. What did you take away from some of the things we heard from the VCs on that panel?
Tim White: The net result is that we are building the Quantum Valley here in Colorado. The Colorado School of Mines, they donated a huge amount of land. With some funding from the CHIPS Act, they are building a campus for quantum computing here in Colorado that is very reminiscent of what was happening in Silicon Valley back in the day, when Shockley was there and building semiconductors for the first time and building all this very low level infrastructure that is at the bottom of the beginnings, of basically starting over with computing. Instead of ones and zeros in silicon semiconductors, we are now talking about starting over with tiny electrons running over a hill like mad kindergartners.
Tim Beyers: We are starting over, but also not starting over. And this was another piece of the story that I thought was very interesting, Tim. Is like, for example, when we were talking about those photonic integrated circuits. Some of the process and tooling that's being used for developing some of this technology is already common. It's stuff that's already in place that's being been used in developing the silicon infrastructure of the last 50 years. One of the things that came up is this idea of quantum adjacent technology that can influence existing technology. We don't necessarily have to reinvent everything in order to start benefiting from quantum right now. I thought that was very encouraging, too but tell me, because you talked a little bit about this. In fact, you made a prediction about it on the show. Maybe you can highlight some of the thinking you had there.
Tim White: I think the idea that all these quantum adjacent technologies, these photonic integrated circuits are also used for telecommunications. Anything that uses fiber optics would benefit from basically miniaturizing the plumbing required to move stuff around at light wavelength. That is extremely interesting and useful now and miniature atomic clocks, useful for building quantum computers, also useful for GPS. I think what my prediction was is that we will see the benefits of these quantum adjacent technologies. The picks and shovels that are being built to try to build quantum computers, those will find their way into our world well before actual quantum computers will. I think that that is great and is historically precedented. We've had many things where we developed a technology in order to do something else, and that technology itself was then useful microwaves and microwave ovens.
Tim Beyers: I don't have a prediction of where we're going to see the first quantum-adjacent technology. I think what we heard at Denver start-up week is like, certainly for hardening and making GPS more resilient, those atomic clocks are clearly one use case. There must be others like that. Here's a bit of my warning around this. Don't listen to us. Getting all excited about quantum and quantum computing, and think that your investment opportunity is going all in early on a micro-cap, quantum computing, start-up that has gone public too early and doesn't have very much to show yet. Because I think, Tim, based on everything we saw, what's so encouraging about that demonstration is that the infrastructure build-out is strategic, thoughtful, very conscious about how much capital is required and not overbuilding, and getting that infrastructure right first so that you can actually get to a state where quantum computing can be done efficiently. You're like, building the launching pad before you build the rocket. I thought that was so clear and smart.
Tim White: There was a question that they asked about where are the jobs going to be in this quantum. Is it all people with PhDs, and all people who understand how to measure quantum entanglement? They were very clear that the answer was no. And to the point made earlier, they are building physical things. This is physical manufacturing that is happening in the United States, in Colorado, because of CHIPS Act twinning. That they are building these refrigerators. They are building these photonic ICs by hand, with people who don't have PhDs, who are people they hired off the street and taught how to do this. That is super exciting. There's an incredible spectrum of jobs that are being created, that it's not just, people sitting in a room, playing with a computer, but people who are building the physical infrastructure of the future.
Tim Beyers: If I were to give, if I were to make a prediction about, tell me where as a public market investor, I could start making money on this. If you don't want me betting on quantum computing microcaps too early because they might be lighting cash on fire, where do I want to be looking? I think one of the places I would bet, Tim, particularly out here in Colorado, because like you said, we're building Quantum Valley out here, I would bet any amount of money that there would be some REITS built around facilities for manufacturing at quantum scale. Research labs, research parks and you'll get a little bit of exposure to quantum because those parks may have quantum research as part of them. But really, all you're doing is putting some money into a relatively stable investment, which is real estate, really well known, very durable, generally pays a dividend, and we know that this is going to be needed. We know this kind of infrastructure is going to be needed. We also know that some of these facilities are going to be very specialized. There is a need to build out those facilities to specification. I certainly see some of these facilities being stood up over the next 5-10 years. That would just be something I just want to watch, Tim. We don't know anything yet. It's still a little bit early, but it's very encouraging to see how this infrastructure is being built out.
Tim White: Even companies that are well in the current manufacturing of integrated circuits today like ASML Holding, their orthography technology is exactly what the photonics folks are using to build their chips that route light instead of electricity. So even picks and shovels like that that are in the current world will continue to be useful in the future. That stuff is also very interesting. I'll give one last shout-out to a company that isn't a quantum that we heard about at Denver Startup Week, which is called Radia, R-a-d-i-a. And they are building super giant airplanes that are so large, they can carry the blades from wind turbines. If you've seen blades from wind turbines on trains in your area, they're absolutely enormous. Getting them out to really rural areas like remote areas is expensive and difficult. This has [OVERLAPPING] the desire to build these farms offshore in the water, in the ocean. Getting them out there on boats is even more difficult. There's a big opportunity to be able to transport these truly massive wind turbine blades out to anywhere in the world at a pretty reasonable speed, as opposed to weeks and weeks before they get there. Very interesting start-up as well that I am going to be watching closely.
Tim Beyers: We often discount how important the government can be as a customer. And what's interesting with a lot of this infrastructure buildout, the CHIPS Act, without making any kind of political statements here. What it's doing is unlocking a little bit of research money for companies to build real product, real infrastructure that they can hopefully go on to compound and build out their own revenue and cash flows. This is really going to be an interesting space to watch. I would expect it to develop a little bit more slowly, Tim, but I would also expect it to grow in a much more resilient and up into the right way instead of being so chaotic as AI has been. I would call it a little bit of the anti AI. I think it's going to be hyper growth, but it's probably a little bit more resilient than what we've seen in the AI market to this point.
Tim White: One of the questions that they answered at the talk was, is this like fusion? Is this like self-driving cars? Where are we add in terms of the hype of this versus when things are going to actually hit the market? They were saying, true quantum computing is tens of years away, most likely. On the other hand, some benefits, some are her moment, where things really light off, is probably three to five years away. Keep your eyes open for that.
Tim Beyers: Quantum computing is not here yet, but the infrastructure to make the quantum future is already here, and it is growing and growing quickly. This is a space that we're going to watch. We think as investors, you may want to watch along with us. We'll check back in on it soon. Thank you for tuning in to this week and tech, and we'll see you soon, Fools. Fool-on.
Mary Long: Members of any Motley Fool Service can watch this week in Tech with Tim Beyers and Tim White every Friday from 10:00 AM to 11:00 AM Eastern, and anytime on the replay hub. To become a Motley Fool member head to www.fool.com/signup. We'll include a link both to the replay hub and to the sign-up page in the showdowns. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against through buyer-sell stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.
