Quantum Computing vs. Traditional AI: Which Tech Stocks to Watch in 2025?

Quantum computing has quickly become a hot topic on Wall Street.

Recently, Alphabet (GOOG) made headlines by announcing a significant advance in quantum technology with its new quantum chip, Willow. The company noted that Willow can significantly cut errors as it becomes more advanced. In a standout demonstration, Willow executed a standard benchmark computation in just five minutes, a task that would take today's fastest supercomputers an unimaginable 10 septillion years to accomplish.

This exciting news led to a surge in interest, boosting Alphabet's stock price and propelling smaller quantum computing firms such as D-Wave Quantum (QBTS), Quantum Computing (QUBT), Rigetti Computing (RGTI), and IonQ (IONQ) upward.

However, in January, many of these stocks faced a downturn as several prominent tech leaders expressed skepticism about the immediate utility of quantum computing. For instance, Nvidia CEO Jensen Huang suggested that practical applications of quantum computing are still 15 to 30 years away. Following suit, Meta Platforms CEO Mark Zuckerberg echoed similar sentiments, asserting that advancements in AI would likely arrive long before quantum computing becomes beneficial. Former Cisco Systems CEO John Chambers also remarked that quantum computing is lagging behind the current AI developments.

Despite these challenges, leading quantum companies are actively defending their technology and future prospects.

Evaluating Investments: Quantum Computing vs. AI

It’s essential for investors to remember that quantum computing is still an emerging field. Many firms, such as Quantum Computing, D-Wave Quantum, and Rigetti Computing, currently have very low revenues. Among these, IonQ stands out as the largest but forecasts only $38 million to $42 million in revenue for 2024, despite doubling its revenue in the third quarter. Given its market capitalization of $9 billion and a price-to-sales ratio exceeding 200, investors are taking a considerable risk with IonQ's stock.

While the potential for quantum computing is uncertain and its timeline for impactful disruption is debated, one thing is clear: traditional AI presents a stronger case for investment. AI is already making strides, growing rapidly, and transforming various industries. AI-related stocks have a greater growth trajectory. Below are two AI stocks that investors might consider adding to their portfolios.

1. Micron Technology

Micron Technology (MU) is primarily known for its memory chip products, but it has recently experienced a significant uptick in demand due to AI applications, similar to many of its competitors. In its fiscal first quarter, which ended in November, revenue soared by 84% to reach $8.7 billion. Particularly notable was the revenue growth from its data center segment, which skyrocketed over 400% year-over-year and 40% sequentially, thanks to strong demand driven by AI technologies.

Micron's close partnership with Nvidia, one of its largest customers, has also driven positive momentum. Recently, Micron's stock rebounded after Nvidia announced its utilization of Micron chips in their new Blackwell platform.

Currently, Micron presents an attractive opportunity for investors, especially following a recent stock dip after an earnings report indicating lower guidance. However, management is optimistic about returning to strong growth, which could result in substantial gains for the stock moving forward. At a forward P/E of 14, the stock appears undervalued relative to its growth potential.

2. TSMC

TSMC (TSM), or Taiwan Semiconductor Manufacturing Company, is another AI stock considered essential for 2025. TSMC is the largest contract chip manufacturer in the world, producing chips for giants such as Nvidia, Apple, Broadcom, and more. With over 50% market share in third-party chip manufacturing and about 90% in advanced chips, TSMC plays a crucial role in the global economic landscape.

In the fourth quarter, TSMC continued to solidify its lead in advanced chip production, with 74% of its revenue derived from chips that are 7 nanometers or smaller. The company experienced a 38% revenue increase, and its operating margin approached 50% during the same period, demonstrating strong demand.

As AI demand continues to rise and the overall chip industry begins to recover, TSMC is poised to have another successful year in 2025 and beyond.

Quantum, AI, Investment