Fiery Flash: Quantum Computing Stocks

This week’s Fiery Flash doesn’t focus on the past stock market performance of a single stock but instead examines the performance of a group of stocks categorized as quantum computing stocks. Pure-play quantum computing companies, such as IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing, have been on fire over the past week, and even more so since the start of this quarter. Quarter-to-date stock returns range from an impressive 330% to a staggering 2,219%.

Last week, this surge was further fueled by an announcement from tech giant Alphabet. Google revealed a breakthrough in quantum computing with its new chip, Willow. This chip demonstrates a significant reduction in errors, addressing one of the most critical challenges in quantum computing. The breakthrough in error correction represents an important step toward building more reliable and scalable quantum computers. Willow features 105 qubits, marking a substantial increase in quantum bits, which are directly tied to a quantum computer’s processing power. In a demonstration, Willow performed a complex calculation in under five minutes, a task that would have taken the world’s fastest supercomputers an estimated 10 septillion years. A septillion is a trillion times a trillion! This stark comparison highlights the immense potential of quantum computers to solve problems far beyond the reach of classical systems.

Though let me rush in to downplay the near-term implications of this announcement, specifically within the coming five years. Willow is undeniably an important milestone on the path to building powerful quantum computers. However, its immediate impact will likely be more significant for scientific advancement and long-term technological development than for widespread commercial applications in the short term.

The recent enthusiasm for the investment case of IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc. stems from their focus on the quantum computing sector and its potential to transform industries such as pharmaceuticals, finance, artificial intelligence, and logistics. While these companies are at the forefront of quantum computing innovation, investors should be mindful of the significant financial challenges they face, including ongoing net losses for the next several years and the need for substantial capital investment. The path to profitability remains uncertain and heavily depends on the successful development and commercialization of quantum technologies.

The involvement of tech giants such as Amazon (providing quantum computing services through AWS), Google (developing powerful quantum systems and targeting 1 million qubits), IBM (building larger quantum computers, aiming for 399 qubits by 2024), Intel (developing practical quantum chips using silicon), and Microsoft (creating advanced qubits to reduce errors) however underscores the long-term potential of quantum computing.  Earlier this month, two U.S. Senators introduced the National Quantum Initiative Reauthorization Act, which would authorize $2.7 billion in federal funding to accelerate quantum research and development at federal science agencies over the next five years.