As the name implies, quantum computing is where the principles of quantum mechanics are used to build more powerful computers. The technology is still in the trial stage, and commercialization may be a ways away. But for investors who have a long view on things, there are some interesting quantum computing stocks to consider.
Yes, the technology can be complicated and there are a myriad of approaches. But at a high level, quantum computing is about processing huge amounts of data to come up with probable solutions — fast. While a traditional computer’s central processing unit will have information encoded as either the number 1 or 0 (bits), a quantum structure will store the information as a blend of values from 0 to 1 (called qubits). This requires sophisticated processes like cryogenics and superconductivity.
“For most tasks, the boost from quantum computing will be modest,” said Mark Zhandry, who is the senior scientist at NTT Research and an assistant professor at Princeton University. “But for a few tasks, the speedup is truly enormous: Tasks that would take longer than the lifetime of the universe to solve on a conventional computer may become instantaneous on a quantum computer. Quantum computing has not reached this milestone yet, but rapid progress is being made. One such task is simulating chemical interactions, which is an important part of developing new drugs and materials. This simulation is therefore likely to be one of the biggest commercial applications of quantum computers.”
Then what are some of the interesting quantum computing stocks you can buy? Well, let’s take a look at seven top names now:
- Microsoft (NASDAQ:MSFT)
- International Business Machines (NYSE:IBM)
- Intel (NASDAQ:INTC)
- Honeywell International (NYSE:HON)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Amazon (NASDAQ:AMZN)
- Booz Allen Hamilton (NYSE:BAH)
Quantum Computing Stocks: Microsoft (MSFT)
When it comes to investing in quantum computing stocks, the focus is often on the hardware side of things. But this really misses the big picture. No doubt, software will be critical for success.
A company that is poised to benefit from this is Microsoft. After all, when Bill Gates and Paul Allen founded the company in the mid-1970s, their first products were computer languages.
So it should be no surprise that Microsoft has been moving aggressively into quantum development tools. At the heart of this is Q# (pronounced Q sharp). This open-source language helps create sophisticated quantum algorithms. But it also has extensions for machine learning, simulations and data processing. Q# code can also be run as a standalone app or from Python or .NET.
“Microsoft appears to be making longer term plays,” said Rafal Janik, who is the head of product at Xanadu Quantum Technologies. “… Q# seems to be focusing on what quantum computers will be in the future more than what hardware actually exists today.”
Note that Microsoft is investing heavily in hardware as well. The platform is called Azure Quantum and has customers like Toyota Tsusho and Jij.
So while the cloud will likely be the main catalyst for MSFT stock, the focus on quantum computing could be another long-term driver.
International Business Machines (IBM)
IBM has the ideal capabilities for the quantum computing market. The company has a long history of building sophisticated computers for the world’s largest organizations. IBM also has thousands of talented researchers and scientists.
Regarding quantum computing, the company has been focused on this for some time. Consider it has the IBM Q Experience, which more than 100 organizations use (they can access the system via the cloud). For example, one of the customers, Mercedes-Benz, is currently using IBM Q to help find ways to create next-generation batteries.
IBM has also developed a software development framework, called Qiskit, for the Q Experience. The company has made this open source and published a free textbook for it.
Granted, when it comes to IBM stock, things have been choppy over the years. But with the company’s efforts with cutting-edge areas like quantum computing as well as heavy investments in its cloud platform — bolstered by its Red Hat acquisition — there are some interesting growth catalysts.
Late last year, Intel announced the Horse Ridge chip. It is the first cryogenic-controlled semiconductor, which should help to accelerate its quantum computing efforts. The technology makes it possible to control 128 qubits at the same time, which is no easy feat.
Horse Ridge actually operates at 4 kelvins, which is near absolute zero (this is when atoms come close to not moving anymore). Cryogenic conditions are necessary for quantum computing because traditional thermal energy would throw everything off.
While this technology is certainly impressive, Horse Ridge isn’t ready for the spotlight. Most experts agree that such a commercial quantum computer would need more than a million qubits.
One of the biggest concerns for Intel stock has been the diminishing returns for traditional CPUs. So in terms of future growth, quantum computing success will be a critical.
Honeywell International (HON)
It may come as a surprise, but Honeywell is a big player in the quantum computing market. The company has a division — Honeywell Quantum Solutions (HQS) — that is developing and commercializing computers based on its unique approach of using trapped ions. This means that the quantum information in the electrons spin within the individual atoms.
Keep in mind that Honeywell does have some major advantages. The company has strong technology abilities that span many industries, such as for advanced electronics, optics, software control systems and cryogenics. There is also a massive customer base as well as a large number of talented engineers, scientists and algorithm designers.
“Our differentiated capabilities include all-to-all qubit connectivity, high-fidelity, and mid-circuit measurements,” said Tony Uttley, who is the president of Honeywell Quantum Solutions. “These will enable accelerated breakthroughs in quantum algorithm development. We believe that quantum computing will eventually have a significant impact on all multi-industry companies. When that happens, those companies will need to figure out how to respond to either take advantage of or mitigate the business changes stemming from the technology. Our approach is to influence how quantum computing evolves and shape the opportunity for Honeywell and our customers.”
It’s a bold vision and it is backed up with significant resources. The move into quantum computers will also likely be a catalyst for HON stock, in terms of tapping into a large market opportunity and going beyond its current customer base.
Alphabet (GOOG, GOOGL)
In a paper in Nature published late last year, researchers from Alphabet showcased their latest innovations in quantum computers. The company actually claimed “quantum supremacy” because its Sycamore processor was able to solve a mathematical problem much faster than a traditional computer could. So how fast? The researchers said it took 3 minutes and 20 seconds versus more than 10,000 years!
Yes, that’s a big deal. And the paper certainly did gin up lots of excitement in the media. Granted, there wasn’t much impact on GOOGL stock. But then again, Alphabet has a diverse set of other businesses.
Interestingly enough, there was some skepticism with the Nature paper. Note that IBM said that the development was actually not that impressive.
Such pushback, though, is normal in the hyper-competitive world of quantum computing. However, Alphabet does have loads of cash and a willingness to make big bets. No doubt, quantum computers are a major priority, as they could be useful for core functions like better search functions and artificial intelligence.
Because quantum computing is far from cheap, the cloud can provide a more affordable option. A customer can essentially rent the service for particular projects.
This approach is definitely ideal for Amazon, which operates the world’s largest cloud platform — Amazon Web Services (AWS). The business is also a major source of growth and operating income.
Late last year, Amazon announced a new offering — called Braket — for access to quantum computers from three hardware startups, including D-Wave Systems, Rigetti Computing and IonQ. It was included on the AWS platform.
In the meantime, the company has launched other efforts, such as the AWS Center for Quantum Computing, which is a partnership with the California Institute of Technology and various other research institutions, as well as Amazon Quantum Solutions Lab. The latter effort helps connect customers with experts and consultants.
Amazon has been somewhat of a laggard with quantum computing. But this is likely to change as it appears that this category is becoming much more of a strategic priority. And in the years ahead, the technology may become a more important factor for AMZN stock.
Booz Allen Hamilton (BAH)
Using quantum computing is even a challenge for tech companies. This means there will be growing demand from top consulting firms.
One of the top players is Booz Allen Hamilton. Founded in 1914, the company currently has 26,300 employees and helps businesses, governments and military groups with IT projects, analytics, cybersecurity and engineering services
About six years ago, the company formed its quantum computing research group. A key benefit is that the team takes an agnostic approach to the myriad hardware systems. There is also a broad array of services provided, such as for basic research, applied analysis and technical consulting.
According to JD Dulny — the chief scientist of Booz Allen’s quantum computing research team — in an interview with The Quantum Daily, “We have seen activity and interest in quantum computing increase dramatically in 2019. Across Booz Allen’s myriad roles throughout our client spaces, we are seeing increasing interest, opportunities, and most of all, potential benefit.”
While it appears that quantum computing consulting is a small part of the overall business, it could ultimately be a nice driver for BAH stock.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.