Quantum computing is one of the hottest trends in the market. It's an innovative technology that's starting to gain wider adoption, but we're still a few years away from widespread commercial use. The trick with quantum computing investing is to get into the leaders before they take off, but not so early that the stocks are essentially dead money until the quantum computing arms race picks up steam.
It's impossible to predict when that will occur, but I still believe some viable quantum computing investments will reward shareholders over the long term if they invest in them now. These are mostly big tech companies that are investing in quantum computing, but I also have one pure-play company that I'm keeping an eye on.
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Alphabet
Alphabet (GOOG 1.63%) (GOOGL 1.67%) kicked off the quantum computing arms race in December 2024 with the announcement of its Willow quantum computing chip. The chip completed a task in five minutes that would have taken the world's most powerful supercomputer 10 septillion years (10 to the 25th power) to accomplish. This test was rigged to demonstrate how a quantum computer operates, but what was significant was how accurately it did so.
The Willow chip achieved a 99.8% two-qubit gate fidelity, a measure of the accuracy of the calculation. This is a significant aspect of quantum computing, as it involves inherent errors in calculations due to the way quantum computers operate.
NASDAQ: GOOGL
Key Data Points
Instead of using bits like a traditional computer, which transmits information as a 0 or a 1, quantum computers use qubits, which can be better described as the probability of an answer being a 0 or a 1. This makes quantum computers excellent for computing tasks that don't have a discrete answer, and incredibly useful for solving problems that can take multiple paths to a final answer, such as weather modeling, logistics networks, and AI.
Alphabet is a leader in the quantum computing arms race and has the excess cash flows to invest a massive amount in this technology if it feels that it's worth it. This makes Alphabet a key player in this space, and it's a stock that I like for the long term.
Microsoft
Alphabet isn't the only big tech company competing in the quantum computing arms race. Microsoft (MSFT +1.48%) also has significant investments in quantum computing and is pursuing the industry for a similar reason as Alphabet: to ensure it has the best computing technology available for its own use and for its cloud computing clients to harness.
Microsoft claims to have created a new state of matter in its Majorana 1 quantum computing chip that allows it to control the qubits precisely. This makes the calculation incredibly accurate, once again addressing the key problem with quantum computers currently.
NASDAQ: MSFT
Key Data Points
Microsoft has similar advantages to Alphabet, and its presence in the quantum computing space should not be overlooked.
IonQ
IonQ (IONQ +0.01%) is a pure-play quantum computing company. There's no backup plan for IonQ; it's quantum computing relevancy or bust. However, IonQ has partnerships with the U.S. Air Force Research Lab (one of the leading government labs), and it has taken an approach that no other company has.
IonQ employs a trapped-ion approach and utilizes all-to-all connectivity. It is generally accepted that qubits become more accurate when they're allowed to interact with each other. While many companies have taken the approach to allow qubits to interact with their neighbors in a grid-like system, IonQ has taken it a step further by allowing every qubit to interact with each other. This approach has delivered an industry-leading 99.9% two-qubit gate fidelity to IonQ.\
NYSE: IONQ
Key Data Points
Additionally, nearly every other quantum computing competitor needs to cool down its chips to near absolute zero, an incredibly expensive process. However, IonQ's technology operates at room temperature, which could be a key advantage for wide-scale deployment.
Although IonQ is still a long way from generating meaningful revenue, I appreciate its approach and current technology, and I believe it's a great way to invest in a pure-play quantum computing company. However, it is an incredibly risky play, and the stock could go to zero if it fails. As a result, investors need to keep their position sizing relatively small.
