Key Points
Quantum computing is just in its infancy. Companies are racing to build their best platform, which is no small task, considering how difficult quantum computing is to do well. Quantum computing isn't currently deployed at any scale, as the companies involved are still trying to prove its worth with various workloads. However, should a company offer a compelling quantum computing solution, the stock could take off and become an absolute monster.
Two stocks that I believe could become monsters in the quantum computing world are Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and IonQ (NYSE: IONQ) . Both companies can massively benefit from a successful quantum computing deployment and are my top picks in the quantum computing investment realm.
Quantum computing is a promising technology
Alphabet kicked off the latest round of investor interest in quantum computing in December when it announced that its Willow quantum computing chip completed a five-minute task that would have taken 10 septillion years (10 to the 25th power) to complete. Now, this computation is only possible using quantum computing, so this test is in Willow's favor, but it noted a significant breakthrough.
Quantum computing differs from traditional computing because it uses qubits instead of bits. While bits transmit information as either a 0 or a 1, qubits can have values ranging between 0 and 1, which allows them to process an infinitely larger amount of information per computing unit. However, because the answer isn't exactly a 0 or a 1, this can introduce errors into the calculation.
Solving this basic quantum computing problem has been the goal of every company involved in the quantum computing arms race, and each company has come up with its own solution for mitigating errors.
Alphabet's solution was to place qubits in a particular grid, allowing them to interact with each other. This interaction has been proven to reduce errors, providing Alphabet with a viable quantum computing solution, as its two-qubit gate fidelity was 99.86%.
IonQ takes this grid approach a step further. Every qubit in its system is connected to every other qubit, which it refers to as all-to-all connectivity. They believe this offers a superior solution to any system that doesn't allow every qubit to interact with each other. It has enabled them to achieve a 99.9% or greater two-qubit gate fidelity.
Additionally, while most companies are supercooling their systems to almost absolute zero, IonQ's approach can be performed at room temperature. This is a key factor when deploying quantum computing solutions, as cooling ions to that temperature is expensive. This could make IonQ's approach more viable than some of its competitors, as cost will be a significant factor in determining how widely deployed quantum computing becomes.
However, we're still a few years away from knowing which company's approach will be superior. So, when will investors get some clarity on quantum computing?
2030 is a critical year for quantum computing
Most quantum computing companies have stated that the demand for quantum computing between 2025 and 2030 will primarily focus on research institutions. However, by 2030, the technology will have become practical enough to deploy on a wide scale.
IonQ's CEO, Peter Chapman, stated that the company will be profitable by 2030, with sales approaching $1 billion. However, they believe that the total addressable market for quantum computing will reach $87 billion by 2035.
The next few years will reveal a great deal about the quantum computing race and which companies will emerge as leaders and which as losers. Quantum computing has huge implications across many industries, most notably in logistics and AI, but there could be further use cases discovered as quantum computing proliferates.
Should Alphabet or IonQ develop a leading solution, their stocks could become absolute monsters and crush the market. However, there's also a chance that the approach these two are taking will flop, which could cause their stocks to suffer. Alphabet, of course, still has its legacy advertising business to lean on, allowing it to be OK from an investing standpoint.
However, IonQ is an all-or-nothing bet on quantum computing, and if it fails, the stock will become worthless. Investors need to consider these two outcomes when determining their position sizing, as the probability of failure is huge.
Before you buy stock in IonQ, consider this:
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