Quantum Computing: The Next Big Wave After AI? 7 Stocks to Watch
The AI theme has been driving the stock market for nearly two years, but investors are starting to worry that the rally might soon lose momentum. The question arises: what could fuel the next wave?
Over the weekend, quantum computing emerged as a possible answer, sparked by Amazon’s launch of the Quantum Embark Program, which aims to integrate quantum computing with AI. This has led to the view that quantum computing may not be a separate trend but an extension of the current AI wave—a solution to the limits imposed by conventional computers. In this scenario, AI serves as the software, while quantum computing provides the next-generation hardware needed to push AI beyond its current boundaries. This prospect has lit up investor interest and sparked lively discussions on social media.
Quantum physics, long regarded as one of the most mysterious and prestigious fields of science, has captivated the brightest minds, from Einstein to Stephen Hawking, and even inspired pop culture through shows like The Big Bang Theory. Its concepts, such as electrons existing in multiple states at once or the idea of parallel universes—popularized as the "Multiverse" by Marvel—have added to its mystique. This same principle underpins quantum computing, where the multi-state nature of electrons enables calculations in multiple dimensions simultaneously, far surpassing the binary 1s and 0s of traditional computers.
In 2019, Google showcased the potential of quantum computing when its 54-qubit quantum processor, Sycamore, completed a computation (random circuit sampling) in 200 seconds—a task that would have taken the world’s fastest supercomputer at the time, Summit, an estimated 10,000 years. This remarkable demonstration highlighted the potential for speedup factors exceeding 1.5 trillion times, showcasing quantum computing’s transformative capabilities.
As investors, the goal is to identify opportunities in this emerging space. Fortunately, there are seven stocks that offer exposure to the quantum computing revolution.
#1 IonQ (IONQ)
IonQ builds quantum computers using trapped ions as qubits, which are controlled with lasers in a super-stable environment. This method allows for highly accurate calculations, long-lasting qubit states, and the ability for any qubit to interact with another. Unlike other systems that need extreme cold or focus on specific tasks, IonQ’s approach is versatile and reliable, making it ideal for a wide range of quantum applications. They are also working on ways to scale their technology with hybrid systems and advanced photonics.
IonQ has started generating revenue, reporting $12.4 million for the quarter ending September 30, 2024. While this figure may seem modest, it reflects strong momentum, with year-over-year growth of 102%.
Riding the wave of heightened investor interest in quantum computing, IonQ's stock has surged 162% year-to-date.
#2 D-Wave Quantum (QBTS)
D-Wave specializes in quantum computers designed for optimization problems using quantum annealing technology. Instead of general-purpose computing, D-Wave’s systems focus on finding the best solutions for complex tasks like scheduling, logistics, and machine learning. Their qubits are superconducting circuits that operate at extremely low temperatures to maintain quantum states. Unlike gate-based quantum computers used by Google or IBM, D-Wave’s quantum annealing is faster for specific problem types but less versatile for broader applications. They continue to advance their technology with more qubits, improved precision, and hybrid quantum-classical solutions to tackle real-world challenges.
D-Wave has lower revenue than IonQ—just $1.87 million in its latest quarter—and experiencing a 27% year-over-year decline in Q3 revenue.
Investors remain optimistic about the potential of quantum computing, pushing the stock up 257% year-to-date, even amid less consistent business growth.
#3 Rigetti Computing (RGTI)
Rigetti Computing specializes in building gate-based quantum computers using superconducting qubits, designed for solving complex computational problems. Known for its hybrid quantum-classical platform, Rigetti integrates quantum processors with classical computing systems to optimize performance for tasks like optimization, machine learning, and chemistry simulations. The company provides cloud-based access to its quantum computers, allowing developers to create and test quantum algorithms. As a pioneer in quantum technology, Rigetti aims to make quantum computing practical and accessible for real-world applications.
Rigetti reported $2.378 million in revenue for its latest quarter, positioning it above D-Wave but still trailing IonQ. However, revenue declined 23% year-over-year, signaling some challenges in growth.
Despite these headwinds, Rigetti's stock has risen 89% year-to-date—lagging behind its pure-play quantum peers but still significantly outperforming the S&P 500 Index.
#4 Quantum Computing (QUBT)
Quantum Computing Inc. (QCi) specializes in developing accessible and affordable quantum computing solutions, focusing on integrated photonics technology. Their quantum machines are designed to operate at room temperature and consume low power, making them practical for various applications. QCi's product portfolio includes high-performance computing, artificial intelligence, cybersecurity, and remote sensing solutions. Unlike companies that require cryogenic conditions for their quantum systems, QCi's approach emphasizes practicality and cost-effectiveness, aiming to make quantum computing more accessible to a broader range of industries.
Despite its ambitious vision, QCi’s revenue remains modest at just $101,000 for the quarter ending September 30, 2024, though this represents a year-over-year growth of approximately 100%.
While fundamentals remain weak, the stock has skyrocketed 585% year-to-date, outperforming all its peers. This surge highlights how investor sentiment, rather than business performance, has driven its recent gains.
