Investing in Quantum Computing: A Stock Worth Considering

The excitement surrounding quantum computing might not be exactly what it appears. Investors should consider focusing on some surprisingly familiar companies in this rapidly evolving sector.

Quantum computing is generating a lot of buzz right now. Just six months ago, the four main publicly traded companies dedicated specifically to quantum computing had a collective market value of $1.9 billion. More recently, that number has soared to a staggering $15 billion, with a peak of $19.2 billion on January 6th.

Choosing the Right Quantum Play

However, this article doesn't aim to suggest investing in those four pure play quantum companies. While they might have potential to grow into significant players in the quantum field over time, there’s a chance they might struggle to maintain momentum. Currently, their earnings are not substantial, and the high valuations may be based on overly optimistic projections about the pace of advancement in quantum technologies.

Quantum Computing Specialist	Market Cap	Revenues (TTM)	Net Losses (TTM)	Price-to-Sales Ratio (TTM)
IonQ (IONQ -1.70%)	$8.8 billion	$37.5 million	($171.6 million)	233
Rigetti Computing (RGTI -3.31%)	$3.1 billion	$11.9 million	($60.6 million)	258
D-Wave Quantum (QBTS -3.00%)	$1.8 billion	$9.4 million	($73.8 million)	191
Quantum Computing (QUBT -3.03%)	$1.3 billion	$0.4 million	($27.9 million)	3,208

Data is sourced from FactSet via Finviz.com as of February 7, 2025. TTM indicates trailing twelve months.

While I wish the best for the firms in the quantum computing space, I would prefer investing in more established tech giants that are also exploring quantum technologies.

For pure play companies, research and development are critical for success. In contrast, larger tech firms can engage in quantum computing as a secondary project. If the quantum revolution takes longer to materialize than expected, investors in these larger firms can still benefit from their core business areas.

This analysis now shifts to the company responsible for reigniting interest in the quantum sector: the parent company of Google, Alphabet (GOOG -3.19%) (GOOGL -3.27%).

The Impact of Google's Willow Chip on the Quantum Market

The recent wave of excitement around quantum computing kicked off with a significant advancement from Google's Quantum AI team.

The introduction of their Willow chip demonstrated progress in error correction. This breakthrough suggests future quantum products may face less noise during computations by utilizing advanced qubit processing units. The standout fact from their report was the Willow chip's ability to complete a specific benchmark process in under five minutes—something that would take a classical supercomputer approximately 10 septillion years to achieve.

It's worth noting that the benchmark test was exclusively designed to highlight the advantages of quantum computing. Essentially, it imitates a moderately complex quantum computing task that is incredibly difficult for classic computers to perform.

As the Google team pointed out, "The test is meant to determine whether a quantum computer can accomplish tasks impossible for classical systems," which emphasizes the importance of this initial test.

However, some investors jumped to the conclusion that quantum computers are already vastly outperforming traditional computers. While enthusiasm is solid, such assumptions can be risky in the realm of investments.

Meanwhile, Google's Quantum AI continues its research. The error correction achievement is just one step in a comprehensive six-stage roadmap. The next goal is to develop long-lived qubits that offer even more reliable error management. This will not happen overnight and could take years to realize fully. The roadmap ultimately aims for a fully operational error-corrected quantum computer featuring millions of qubits instead of the mere hundreds currently being used. Estimates suggest this monumental development may still be two decades away.

Smart Ways to Invest in Quantum Computing

Alphabet isn't the only major tech player engaged in quantum research.

Different companies are exploring various aspects of quantum technology. For example, IBM (IBM -0.43%) leads in quantum-related patents. Microsoft (MSFT -1.46%) aims to integrate quantum systems into existing cloud platforms. Nvidia (NVDA 0.90%) is focused on creating software solutions for quantum programming.

These tech giants are likely more reliable investment opportunities in the quantum space compared to the smaller companies mentioned earlier. However, Alphabet is currently considered an undervalued player. Its price-to-sales (P/S) ratio is pegged at just 6.5. If you are on the lookout for a promising quantum computing company that also presents a strong buying opportunity at this time, Alphabet seems to be a compelling choice.

Suzanne Frey, an executive at Alphabet, holds a position on The Motley Fool's board of directors. Anders Bylund owns shares in Alphabet, IBM, and Nvidia. The Motley Fool has stakes in and endorses Alphabet, IBM, Microsoft, and Nvidia. They recommend specific trading strategies that involve options on Microsoft. Please refer to their disclosure policy for more details.

Quantum, Investing, Stocks