Microsoft's Quantum Leap: A Buy or Hold?

Microsoft's (MSFT) recent announcement of its Majorana 1 quantum chip has sent ripples through the tech industry, sparking debate on the potential impact on other quantum computing companies and the broader market. As investors, we must ask: is Microsoft's quantum breakthrough a reason to buy the stock, or should we hold off and wait for more developments?



Microsoft's Majorana 1 chip utilizes a new state of matter to perform quantum computing tasks, marking a significant breakthrough in the field. The company estimates that it can scale this chip to have 1 million qubits, a key threshold for commercially viable tasks. This announcement serves as a clear warning shot across the bow of other quantum computing companies, including IonQ (IONQ), which is also working on developing quantum computing technologies.



The market's reaction to Microsoft's announcement was relatively tepid, with IonQ's stock declining by around 8% since the announcement, while Microsoft's stock declined by around 3%. This indicates that the market is not overly concerned about IonQ being wiped out by Microsoft's breakthrough, as IonQ's stock would have sold off by a lot if that were the case. Instead, most of the sell-off is centered around tech stocks in general.

IonQ continues to ink deal after deal with various clients to further its quantum computing research, whereas Microsoft has kept its research in-house. This suggests that IonQ's focus on useful results rather than building a perfect chip may work out well for the company, as its CEO thinks that viable quantum computing is just around the corner. IonQ's quantum computing systems launching in 2025 and 2026 are expected to deliver near-term business value, and the company believes it will have sales of around $1 billion by 2030. This would be a huge milestone for IonQ and could potentially make it a winner in the quantum computing arms race.

However, it is essential to remember that Microsoft's breakthrough is still in its early stages, and the practical implications for the broader market remain uncertain. While Microsoft's Majorana 1 chip is a significant advancement in quantum computing, it is not yet clear how this technology will translate into commercial applications or how it will impact other quantum computing companies.



In conclusion, Microsoft's quantum breakthrough is an exciting development in the field of quantum computing, but it is too early to tell whether it is a reason to buy the stock. As investors, we must remain vigilant and monitor the progress of Microsoft and other quantum computing companies as the technology continues to evolve. While IonQ's focus on useful results and expected near-term business value suggest that the company may be well-positioned to compete in the quantum computing arms race, the market's reaction to Microsoft's announcement was not uniform, and the impact on other companies such as Rigetti Computing and D-Wave Quantum is not clear. As always, it is crucial to do thorough research and consider multiple factors before making investment decisions.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long MSFT.