Quantum Leap: Exploring Top Stocks and the Future of Quantum Computing
AInvestWednesday, Dec 11, 2024 7:20 pm ET
13min read
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Quantum computing is rapidly transitioning from a theoretical concept to a transformative technology with the potential to redefine industries and solve problems that are insurmountable for classical computers. In 2025, quantum computing is expected to remain a dominant theme as advancements in hardware, software, and practical applications continue to accelerate. Major players like Google, IBM, and emerging startups are making breakthroughs in building scalable quantum systems, while governments and corporations are heavily investing in quantum research and infrastructure. The urgency is fueled by the technology's promise in areas like cryptography, optimization, artificial intelligence, and materials science, all of which could unlock unprecedented efficiencies and innovation.

The significance of quantum computing in 2025 also lies in its growing implications for security, competition, and technological leadership. As quantum systems inch closer to surpassing classical computers in specific tasks, concerns about the vulnerability of current cryptographic standards are intensifying, prompting industries to explore quantum-safe encryption. Simultaneously, the geopolitical race for quantum supremacy underscores its strategic importance, with countries vying for dominance in quantum technology to secure economic and military advantages. With advancements like Google's quantum chip Willow raising questions about the timeline for widespread impact, 2025 is poised to be a pivotal year where quantum computing moves closer to mainstream adoption and reshapes the technological landscape.

What is Quantum Computing?

Quantum computing is an advanced form of computing that utilizes the principles of quantum mechanics to solve complex problems much faster than classical computers. Unlike classical computers that use bits (0s and 1s), quantum computers operate with qubits, which can exist in multiple states simultaneously due to a property called superposition. This unique characteristic allows quantum computers to explore many possibilities at once, offering immense computational power for certain tasks. Additionally, qubits can be entangled, meaning their states are interconnected, enabling coordinated operations that significantly enhance processing capabilities.

The potential advantages of quantum computing are profound. It can revolutionize fields like cryptography by breaking existing encryption methods and creating new, secure systems. Quantum computers can also optimize complex problems in logistics and finance, simulate molecular structures for drug discovery, and enhance artificial intelligence algorithms. However, the technology faces challenges such as qubit instability, susceptibility to environmental noise (decoherence), and the need for sophisticated error correction. Building scalable, reliable quantum systems is another significant hurdle researchers are working to overcome.

While still in its infancy, quantum computing has made significant strides, with companies like IBM, Google, and startups leading innovation. Current systems, known as Noisy Intermediate-Scale Quantum (NISQ) devices, are limited in scale and precision but demonstrate the potential of this technology. As research progresses, quantum computing could become a transformative force across industries, solving problems that are currently impossible for classical computers to handle efficiently.

As we delve into the landscape of 2025, we turn our focus to some of the leading stocks in the quantum computing field, a sector poised to remain a prominent theme. Additionally, we will explore the potential implications of quantum advancements for Bitcoin, an asset class that continues to reach unprecedented heights.

Quantum Computing and Bitcoin: A Potential Threat

The advent of Google's new quantum computing chip, Willow, has reignited concerns about the vulnerability of Bitcoin and other cryptocurrencies to quantum computing attacks. According to Emin Gün Sirer, Ava Labs co-founder, early Bitcoin holdings, particularly those stored in Pay-to-Public-Key (P2PK) format, are especially susceptible. These early holdings, which include those attributed to Bitcoin's pseudonymous creator, Satoshi Nakamoto, could theoretically be cracked by sufficiently advanced quantum computers. Sirer suggests preemptive measures, such as freezing Satoshi's coins or phasing out P2PK transactions, to mitigate potential risks. While current quantum computing capabilities are not yet advanced enough to exploit such vulnerabilities, rapid advancements in the field are intensifying concerns.

Bitcoin and other cryptocurrencies currently employ encryption techniques that make it difficult for quantum computers to compromise their security. Public keys in Bitcoin transactions are exposed only briefly, giving quantum attackers a very narrow window of opportunity. Additionally, while quantum computers excel at certain mathematical operations, such as factoring large numbers, other critical functions like inverting one-way hash functions remain resistant. These limitations currently provide a buffer against quantum threats. However, broader concerns persist, as highlighted in a Bloomberg report, which warns that future quantum advancements could enable attackers to decrypt private keys or dominate mining processes, potentially centralizing blockchain networks and undermining their security.

Google's introduction of the Willow chip underscores the urgency of preparing for a future where quantum computing could challenge existing cryptographic standards. Although the technology is not yet a direct threat to Bitcoin, its rapid development suggests that cryptocurrencies must evolve to stay ahead. The crypto community has expressed heightened concern, with some emphasizing the need for proactive strategies to safeguard Bitcoin's security framework. As quantum computing matures, it could pose significant risks to the decentralized ethos and resilience of blockchain technologies, making it imperative for the industry to prioritize quantum-resistant solutions in its security roadmap.

The Companies to Watch

International Business Machines (IBM)

Market Cap: $214 billion

Revenue: $62.58 billion

Forward P/E: 21.62x

Stock YTD: 41%

IBM has established itself as a frontrunner in the race to make quantum computing commercially viable, leveraging decades of expertise and a robust infrastructure. The company's progress is evident in its roadmap, which includes the creation of a 433-qubit quantum processor in 2022, the unveiling of its 1,121-qubit Condor processor, and its ambitious plans to produce a 4,000-qubit system by 2025 and a 100,000-qubit system by 2033. IBM's modular Quantum System Two and its Heron chip exemplify innovations aimed at overcoming key quantum challenges like error correction and decoherence. These advancements are supported by IBM's Quantum Network, which connects researchers and developers globally, and its open-source Qiskit software, which simplifies quantum algorithm development and enhances circuit optimization.

IBM's commitment extends beyond hardware, as evidenced by significant reductions in processing time for quantum tasks and its success in demonstrating quantum utility for practical applications. The company's quantum systems are being used for pioneering research in materials science, life sciences, and chemistry, with partnerships such as the Cleveland Clinic and Riken Research Institute pushing the boundaries of what quantum technology can achieve. With continuous innovation, improved quantum processors, and software enhancements like the Qiskit Code Assistant, IBM is well-positioned to lead the quantum industry into 2025 and beyond, delivering transformative solutions across multiple sectors.

While IBM is not a pure-play on the quantum space it stands at a reasonable valuation and its revenue stream from other verticals will allow it to work through the peaks and valleys expected in quantum computing for the next 10 years. It is relatively cheap at 21x earnings and stands as the best way to play quantum computing at this time. 

Alphabet (GOOG)

Market Cap:  $2.39 trillion

Revenue:  $339 billion

Forward P/E: 21.8x (Price to Sales 7.1x)

Stock YTD: +39.4%

Google is certainly not a pure play but it should be included in the discussion. Google's unveiling of the Willow quantum computing chip marks a significant step forward in the quantum space, addressing critical challenges that have long hindered the field. With 105 qubits, Willow introduces groundbreaking advancements in error correction, a persistent issue in quantum computing due to the fragility of qubits. By reducing errors exponentially as more qubits are added, Willow cracks a problem that has stymied researchers for nearly 30 years. The chip's performance is equally impressive: it completed a benchmark computation in under five minutes, a task that would take a conventional supercomputer 10 septillion years, vastly exceeding known physical timescales. This breakthrough reinforces Google's position as a quantum computing leader and highlights its commitment to long-term innovation.

Willow's advancements not only push the boundaries of quantum computing but also set the stage for real-world applications that could revolutionize various industries. Google has emphasized that its quantum technology could one day unlock transformative potential in areas such as drug discovery, battery design, and fusion energy. Additionally, Willow's design and performance could bolster AI development by accelerating the collection of training data and enabling simulations that are currently unfeasible with classical systems. Beyond specific use cases, Willow represents the second milestone in Google's six-step roadmap to develop commercially viable quantum computers, aiming for systems with a million qubits capable of solving practical problems at scale.

While Google is far from a pure-play quantum computing stock, its deep pockets and extensive resources give it a strategic advantage over smaller, specialized competitors. The company's dedicated fabrication facility for quantum chips and focus on producing reliable qubits highlight its commitment to iterative improvement and leadership in the space. Alphabet's diversified revenue streams and robust financial position allow it to invest heavily in quantum research without being solely reliant on near-term commercial quantum breakthroughs. For investors, this makes Google a compelling option for exposure to quantum technology without the speculative risks associated with pure plays. Willow's announcement underscores the transformative potential of quantum computing and reinforces Alphabet's enviable position in driving the field forward.

Rigetti Computing (RGTI)

Market Cap:  $1.55 billion

Revenue:  $11.89 million

Forward P/E: N/A (Price to Sales 132x)

Stock YTD: +548%

Rigetti Computing, Inc. (NASDAQ:RGTI) is a Berkeley-based quantum computing company specializing in superconducting qubit technology. The company has developed cutting-edge tools like the Forest software development kit and PyQuil programming language, which enable researchers to simulate quantum computations using classical computing infrastructure. Rigetti is also at the forefront of hardware innovation, building quantum processors and quantum computers while offering Quantum Cloud Services that integrate quantum processing capabilities with traditional computing. Strategic partnerships with industry leaders such as NVIDIA, Amazon, and Fermilab enhance Rigetti's position as a key player in the evolving quantum computing landscape.

Recent advancements and achievements highlight Rigetti's leadership in the field. The company has announced plans to launch a 100-qubit system and produce its 336-qubit Lyra processors by 2025. Rigetti's successful integration of AI to address quantum scaling bottlenecks demonstrates its commitment to overcoming key challenges in the industry. Despite the speculative nature of quantum computing, the company's breakthroughs, coupled with a strong roadmap and high-profile partnerships, position it as a potential infrastructure leader akin to NVIDIA in the AI market. Analyst optimism, including an increased price target from Alliance Global Partners, further underscores confidence in Rigetti's trajectory.

Rigetti's stock has seen significant gains, rallying over 500% in the last year and continuing its upward trajectory. However, the company trades at over 100 times its projected 2025 revenues, making it a highly speculative investment. The need for additional financing may lead to shareholder dilution, and competition from major players like Google and IBM adds further risk. Despite these challenges, the quantum computing sector is rapidly growing, and Rigetti's position at the forefront of innovation could make it a rewarding long-term play. For investors with a high-risk tolerance, a small position in Rigetti or broader exposure through a quantum computing ETF could offer significant upside potential as the quantum revolution unfolds.

D-Wave Quantum (QBTS)

Market Cap:  $1.21 billion

Revenue:  $9.42 million

Forward P/E: N/A (Price to Sales 128x)

Stock YTD: +373%

D-Wave Quantum Inc. (NYSE: QBTS) stands out as the first company to commercialize quantum computing systems, focusing on quantum annealing technology. This approach targets optimization problems, solving complex challenges in industries such as logistics, healthcare, and finance. D-Wave's flagship product, the Advantage system, integrates thousands of qubits and can handle vast optimization tasks, positioning the company as a leader in this niche. Collaborations with major customers like NTT DOCOMO and Japan Tobacco demonstrate the real-world applicability of its technology, addressing network performance and accelerating drug discovery through quantum-enhanced AI. These partnerships, along with advancements like the 4,400-qubit Advantage2 processor, highlight D-Wave's commitment to innovation and its unique approach to quantum computing.

D-Wave operates in a burgeoning quantum computing market, which is expected to grow from $885.4 thousand in 2023 to $12.6 billion by 2032. However, the company's financials reflect the early stage of quantum technology adoption. For Q3 2024, revenue declined 27% year-over-year to $1.9 million, with professional services revenue dropping 80%, though quantum computing-as-a-service revenue increased by 41%. Net losses widened to $22.7 million, underscoring the challenges of monetizing cutting-edge technology. Despite these setbacks, institutional interest is growing, with major investors like Vanguard, BlackRock, and Goldman Sachs increasing their stakes, reflecting confidence in D-Wave's long-term potential. Management's guidance for improved bookings and revenue in late 2024 further supports optimism about its near-term growth trajectory.

D-Wave Quantum trades at an aggressive valuation, currently over 100 times trailing sales, reflecting investor enthusiasm for quantum computing's transformative potential. While the market opportunity is immense, with exponential growth anticipated over the next decade, D-Wave's modest revenue and widening losses highlight its speculative nature. Analysts project revenue growth of nearly 70% by 2025, but significant commercial breakthroughs are likely years away, with fully scalable quantum computers not expected until 2035 or beyond. For risk-tolerant investors with a long-term horizon, D-Wave's first-mover advantage and unique focus on quantum annealing may justify a small position. However, given the nascent state of the industry and intense competition, cautious optimism is warranted.

IonQ Inc (IONQ)

Market Cap:  $6.69 billion

Revenue:  $37.47 million

Forward P/E: N/A (Price to Sales 178x)

Stock YTD: +149%

IonQ Inc. (NYSE: IONQ) stands out in the quantum computing space as a pioneer specializing in trapped ion technology. This method provides superior stability and connectivity between qubits, allowing IonQ to tackle longstanding challenges in scalability and error correction. In 2024, IonQ made headlines with the launch of its Forte quantum computer, which showcased significant advancements in qubit fidelity and performance, fueling optimism about the company's potential to achieve commercial quantum advantage. Beyond hardware, IonQ has strategically partnered with major players like Microsoft and AWS, enabling its quantum solutions to reach a broader audience through cloud platforms. This integration of cutting-edge technology with accessible deployment options positions IonQ as a leader in practical quantum applications.

IonQ's financials highlight a blend of rapid growth and high costs typical of emerging technologies. In Q3 2024, the company reported $12.4 million in revenue, a 102% year-over-year increase, driven by growing demand and strategic partnerships. However, IonQ also reported a net loss of $52.5 million, reflecting its heavy investment in research and development. With $382.8 million in cash and no debt, the company has the financial flexibility to sustain its innovation pipeline. Analysts project a booming quantum computing market, expected to grow at a 34.8% compound annual rate through 2032, placing IonQ in a strong position to capitalize on increasing demand for quantum solutions in industries like pharmaceuticals, logistics, and artificial intelligence.

IonQ's valuation is a key point of contention. With a market capitalization of $8.2 billion and trading at over 175 times trailing sales, the stock commands a steep premium that assumes near-flawless execution and sustained triple-digit revenue growth. While the company's leadership in quantum technology and strategic partnerships bolster its appeal, the high cash burn rate—spending $2 for every $1 of revenue—raises sustainability concerns. For risk-tolerant investors with a long-term horizon, IonQ offers exposure to a transformative technology with immense potential. However, the current valuation makes it a speculative play, requiring cautious optimism and an understanding of the challenges inherent in an emerging and highly competitive industry. Investors should monitor execution closely and consider diversifying exposure through broader quantum-focused investments.

Quantum Computing (QUBT)

Market Cap:  $744.7 million

Revenue:  $390,000 (thousand)

Forward P/E: N/A (Price to Sales 1,900x)

Stock YTD: +589%

Quantum Computing Inc. (NASDAQ: QUBT) focuses on integrating photonics technology into quantum computing, aiming to deliver affordable, practical quantum machines. A key part of its strategy is its Dirac systems, which are portable, room-temperature quantum devices designed for applications in AI, cybersecurity, and remote sensing. Additionally, the company produces advanced photonic chips, including those utilizing thin-film lithium niobate (TFLN) technology. These chips are positioned to serve telecom, AI, and data center markets, with plans for a fully operational TFLN fabrication facility in Arizona by 2025. While the company has shown momentum with its product development and partnerships, such as a letter of intent with Comtech Telecommunications, its operations remain in an early stage, requiring substantial capital investment and operational scaling.

QUBT's financials reflect a nascent company navigating the challenges of developing cutting-edge technology. In Q3 2024, the company reported a modest revenue of $101,000, a doubling from the previous year, largely due to a quantum LiDAR prototype project. Despite this growth, gross margins dropped significantly from 52% to 9%, attributed to high direct costs. Operating expenses decreased by 18% year-over-year to $5.4 million, signaling tighter cost controls, while R&D spending remained steady at $2.2 million, underlining the company's commitment to innovation. With only $3.1 million in cash and substantial capital expenditures for its TFLN foundry, QUBT remains heavily reliant on external funding. Recent securities offerings are expected to generate $50 million in gross proceeds, providing critical runway but raising concerns about shareholder dilution.

QUBT's valuation appears highly speculative, with a market capitalization nearing $880 million against a projected 2025 revenue of just $1.5 million. This disconnect between revenue and valuation underscores the high expectations for the company's future growth, especially from its TFLN foundry and quantum technologies. While the potential applications of its products are vast, QUBT's dependence on external capital, ongoing cash burn, and low-margin contracts present significant risks. For investors, QUBT represents a high-risk, high-reward opportunity. Those with a long-term horizon and high-risk tolerance may consider a speculative position, but the stock's current valuation and reliance on future execution suggest caution is warranted. Without significant revenue growth and margin improvement, the company's ability to sustain its operations remains uncertain.

Defiance Quantum ETF (QTUM)

The Defiance Quantum ETF (QTUM) tracks the BlueStar Quantum Computing and Machine Learning Index, which includes 73 globally listed companies engaged in quantum computing, AI, and related transformative technologies. The ETF focuses on firms generating at least 50% of their annual revenue from quantum computing, machine learning, and high-powered computing technologies. Its diversified portfolio offers exposure to quantum innovation, advanced computing hardware, data connectivity solutions, and software for big data management. By blending growth and value companies, QTUM provides retail investors with a balanced and less volatile way to invest in this cutting-edge industry.

The ETF holds $412 million in net assets and includes 73 stocks. Its top 10 holdings represent leading quantum and AI innovators:

1. Rigetti Computing Inc. (RGTI): 8.44% of assets, focusing on superconducting quantum systems.

2. D-Wave Quantum Inc. (QBTS): 6.86%, specializing in quantum annealing technology.

3. IonQ Inc. (IONQ): 4.94%, leveraging trapped ion technology.

4. MicroStrategy Inc. (MSTR): 3.11%, notable for Bitcoin holdings and analytics software.

5. Marvell Technology Inc. (MRVL): 1.73%, a semiconductor leader.

6. Coherent Corp. (COHR): 1.70%, in photonics and laser solutions.

7. IBM Corp. (IBM): 1.63%, a pioneer in quantum computing.

8. NTT Data Group Corp. (9613 JP): 1.59%, offering IT and consulting services.

9. Wipro Ltd. (WIT): 1.55%, focused on IT and quantum research.

10. Radnet Inc. (RDNT): 1.52%, specializing in diagnostic imaging services.

QTUM's expense ratio is 0.40%, with a 30-day SEC yield of 0.90%, offering a modest but reliable dividend. The ETF provides a strategic avenue for investors to gain exposure to quantum computing's immense growth potential, with a diversified approach mitigating risks in a still-emerging field. Its focus on both cutting-edge quantum innovators and established tech companies makes QTUM a compelling option for those seeking to balance long-term growth with stability.

BTQ Technologies (BTQQF)

BTQ Technologies Corp. (OTC: BTQQF) operates at the intersection of blockchain technology and quantum computing, focusing on developing post-quantum cryptography solutions to address the existential threat quantum computing poses to current encryption standards. Despite generating modest annual revenues of only $400,000, the company is gaining attention as a potential solution for safeguarding blockchain networks which we discussed above. BTQ's specialized focus on securing digital assets from quantum attacks sets it apart in the broader quantum computing space. Its portfolio includes tools like PQScale for efficient post-quantum signatures, Keelung and Kenting for enabling zero-knowledge proofs (ZKPs), and QCIM, a low-power processor for post-quantum cryptography. These innovations aim to make blockchain systems quantum-resistant, protecting the integrity of decentralized networks as quantum capabilities evolve.

BTQ is positioning itself as a critical player in the transition to quantum-proof blockchains. Its PQScale system addresses the inefficiency of integrating post-quantum signatures into existing blockchains by combining signatures into smaller, scalable formats. Similarly, Keelung and Kenting enable developers to implement ZKPs, enhancing privacy and security in blockchain applications. By simplifying ZKP adoption through accessible tools and reconfigurable hardware, BTQ is bridging a critical gap for developers. The QCIM processor targets the proliferation of quantum-compatible encryption in low-power applications, such as IoT devices, ensuring that even smart devices can resist quantum threats. These offerings highlight BTQ's proactive approach to solving blockchain's quantum challenges before the technology becomes an active risk.

BTQ Technologies remains a speculative investment, given its limited revenue and early-stage operations. However, its narrow focus on post-quantum blockchain solutions positions it as a potential leader in this niche market. With digital assets exceeding $1.27 trillion in value, the need for quantum-resistant blockchain systems is growing, giving BTQ a significant addressable market. While the company's innovative products are promising, its reliance on external funding and low revenue base pose risks. Investors should approach BTQ as a high-risk, high-reward opportunity, suitable for those with a strong appetite for speculative plays. The company's success hinges on its ability to commercialize its technology and scale adoption before quantum computing becomes a mainstream threat to blockchain security.

Conclusion

In summary, while there are numerous ways for investors to gain exposure to the quantum computing sector, the current landscape is fraught with risks. Many quantum-focused companies are experiencing inflated valuations despite lacking the revenues or profits to justify their market caps. Established players like IBM and Google offer a more balanced approach, as their success doesn't hinge solely on quantum computing, making them appealing for long-term investments in the space. Smaller, pure-play companies are undeniably exciting and could deliver massive returns for early investors, but with extended valuations and meaningful revenues likely years away—possibly into the 2030s—there is a significant risk of being caught in speculative bubbles. For most investors, a prudent strategy would be to focus on safer, diversified plays while waiting for pullbacks to trade selectively in more speculative names.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.