While the financial markets are consumed with all things artificial intelligence, many investors are missing the boat on the next massive technology breakthrough – quantum computing. Quantum computers handle scientific calculations that otherwise could take millions of years to solve using traditional computers.

The technology’s growth rate is impressive. The quantum computing market is valued at $1.3 billion in 2024 and is expected to rise to $5.3 billion by 2029, according to Markets and Markets. That’s a compound annual growth rate of 32.7%.

The industry is in the midst of a giant sea change, as quantum computing morphs from a sheer numbers enterprise to prioritize qubit quality, complicated problem solving and error corrections. Global governments are pouring billions into the sector, as are companies in major industries like banking, pharmaceuticals and sustainable energy.

“Quantum technology could create value worth trillions of dollars within the next decade,” consulting firm McKinsey stated in a recent study. “Accelerating technological breakthroughs, increasing investment flows, startup proliferation and promises of capable quantum systems by 2030 signal it’s time for business leaders to begin planning their quantum computing strategies.”

With abundant promise in the sector, which quantum computing stocks offer the most growth potential in 2024? These eight technology companies are in the mix:

Microsoft Corp. (ticker: MSFT) 11.0%
International Business Machines Corp. (IBM) 3.3%
Nvidia Corp. (NVDA) 84.4%
Alphabet Inc. (GOOGGOOGL) 21.9%
Honeywell International Inc. (HON) -2.6%
Amazon.com Inc. (AMZN) 23.1%
Intel Corp. (INTC) -37.8%
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) 46.7%

Microsoft shares are up by 11% year to date through May 14, as the technology titan remains on the leading edge of quantum computing innovation.

The company has partnered with the U.S. Defense Advanced Research Projects Agency (DARPA) to use Microsoft Azure Quantum technology to develop a utility-scale quantum computer modeled on topological qubits, which scientists believe to be more stable than other qubits, mainly because they’re easier to store securely.

The company also recently announced a big step forward in its partnership with private quantum computing developer Quantinuum (formed by the merging of Honeywell Quantum Solutions and Cambridge Quantum) to make advanced computers more reliable, which would aid in commercializing quantum computing.

Microsoft also says its new error-correction algorithm can run up to 14,000 individual experiments without errors, about 800 times better than any previous quantum computing algorithm. Both companies believe the breakthrough will chop about two years off quantum computing development, which is good news for the industry and Microsoft investors.

International Business Machines Corp. (IBM)

IBM is only up 3.3% against the S&P 500’s 10% gain on a year-to-date basis, but it delivers a robust 4% dividend yield and a solid quantum computing storyline.

Big Blue has made it clear it sees the quantum computing journey as having three phases – the era of emergence, the era of utility and quantum of scale. The company says quantum technology is in the second phase in mid-2024, as quantum computers can now solve complex data problems that go light years beyond classical computing.

IBM has planted itself squarely in the journey, having installed quantum processors across the globe with its Quantum Computation Centers in New York; Fraunhofer, Germany; the University of Tokyo in Japan; and at the Ohio-based Cleveland Clinic. An IBM Quantum System One computer recently went online at Rensselaer Polytechnic Institute in New York, and there are plans for quantum computing centers at Yonsei University in South Korea in 2024 and at the Basque Foundation for Science in Spain in 2025.

IBM rolled out its new quantum computers last year, allowing the generation of specific results at a scale of 100-plus qubits (that’s the sweet spot for quantum computing, scientists say) and putting IBM exactly where it wants to be: at the head of the line, ahead of classical supercomputing approaches.

Toss in IBM’s higher dividend, which pays out $1.67 per share every quarter, and a new target price of $185 (it’s at $167.36 per share as of May 14) from analyst firm Bernstein, and IBM is making an excellent case for itself as a quantum computing pioneer and a dependable stock play.

Nvidia shares continue their historic run, up 84.4% year to date and 215.6% over the past year as of May 14.

While Nvidia has made its reputation in technology hotspots like artificial intelligence and machine learning, it also plays a considerable role in the quantum computing market, as it’s one of the leading providers of graphics processing units, or GPUs, used to power faster computing performance. The company’s DGX Quantum represents the first computing system to merge GPUs and quantum computing.

The company reinforced its commitment to quantum technology with a March announcement touting its new Quantum Cloud data center, which will “incorporate artificial intelligence chips and systems that work together to simulate a quantum computer,” the company stated in a news release.

While Nvidia doesn’t build quantum computers, it plans to provide easy access to third-party quantum systems in the near future. The company’s new “bridging technology” will offer companies an open-source platform for integrating and programming quantum processing units (QPUs), GPUs and CPUs in one system via its Nvidia CUDA-Q open programming model.

Nvidia is also engaged in two real-world quantum computing initiatives: one with Rolls-Royce Holdings PLC (OTC: RYCEY) to develop more efficient jet engines and the other with FZJ, a research institution in Germany, to construct a new laboratory specializing in classical quantum supercomputer systems.

Given its high price (at $913.56 per share) and the long runway required for a quantum computing payoff, investors will need deep pockets and even deeper patience with Nvidia – but that’s a price prepared investors are likely happy to pay.

Alphabet’s stock is up 21.9% so far in 2024, soundly thrashing the S&P 500’s return as of May 14.

Known for its industry-leading web search engine technology, Alphabet-owned Google has also been developing quantum computing solutions since 2006. Commercially, Google is creating a software suite that helps technology companies build quantum algorithms via its Google Quantum AI initiative. It’s also in the quantum processing business with its Alphabet 72-qubit quantum processor, which reduces data-testing error rates while working seamlessly with the software applications and control electronics needed to operate in the quantum sector.

Google is having some fun with its quantum computing strategy.

In March, the company also announced a new three-year, $5 million worldwide quantum computing competition in partnership with the XPRIZE Foundation and the Geneva Science and Diplomacy Anticipator Foundation. The competition, which targets the expanding quantum technology supplier and early user communities, will award cash prizes to developers who generate the best quantum computing algorithms and applications that solve real-world problems.

Cost-cutting measures and solid revenue growth should continue boosting Alphabet until its big bets on AI and quantum computing start paying off.

Honeywell International Inc. (HON)

Honeywell shares are down 2.6% in 2024, but its quantum computing investments – at about $300 million – are beginning to bear fruit.

The aforementioned Honeywell Quantinuum, formed in 2021, is a solid player in the quantum computing sector. Its quantum hardware and software computing power is used extensively in industries such as chemicals, pharmaceuticals and manufacturing. The company was recently valued at $5 billion.

In April, Quantinuum became the first company to clear the so-called “three nines” dilemma, which it describes as “an iconic, inherent 99.9% 2-qubit physical gate fidelity – at which point many of the error-correcting codes required for universal fault-tolerant quantum computing would successfully be able to squeeze errors out of the system.”

Quantinuum solved the three-nines problem via a demonstration of 99.914(3)% 2-qubit gate fidelity, which showed “repeatable performance across all qubit pairs” on the company’s H1-1 system. “This demonstrates what will fast become the expected standard for the entire quantum computing sector,” Quantinuum noted.

Honeywell should continue to profit from its big investment in quantum computing. Robert W. Baird analyst Peter Arment has issued a “buy” rating on HON stock and set a $223 price target. Trading at $203.21 per share as of May 14, HON also offers a decent forward dividend yield of 2.1%.

Amazon’s stock price is up 23.1% on a year-to-date basis, and it is making significant progress in rapidly expanding its presence in the quantum computing sector.

Its cornerstone is the AWS Center for Quantum Networking, which opened in 2022. The center is taking a long-term approach to developing quantum network solutions and its Amazon Quantum Solutions Lab. Amazon also recently rolled out Amazon Braket, a cloud-based quantum computing service that researches and develops new quantum computing technologies.

The retail giant is also making strides on the microchip side of the quantum computing business. In November 2023, the company rolled out a new quantum computer chip focused on enhancing error correction. Amazon built the prototype in-house, marking another major step for Amazon Web Services as a chip fabrication facilitator. The company noted the chip could suppress bit flip mistakes 100 times faster than current error correction times using a “passive error correction approach.”

“We’ve shown that we can theoretically achieve quantum error correction six times more efficiently than with standard error correction approaches,” AWS senior vice president Peter DeSantis said at a conference in Las Vegas in November.

Amazon is yet another deep-pocketed player that can take its time developing new products, knowing that its massive revenue base can help. It breezed through its first-quarter earnings period, with Q1 sales up 13% to $143.3 billion, higher than the estimated $142.5 billion pegged by analysts. Amazon expects to keep that rolling in Q2, estimating revenues of up to $149 billion in an April 30 conference call.

Intel’s stock has been on a downward spiral in 2024, and shares have shed an alarming 37.8% so far this year. The slide came after the company cited new restrictions on semiconductor sales to China-based Huawei Technologies. Sales for the quarter ended in March rose 9% on an annual basis and the stock has seen a slight recovery from its lows, but Intel’s guidance for the current quarter fell short of analyst expectations.

However, a 31% rise in PC chip sales and a moderate boost in data center chips were buried in the Q1 numbers, suggesting Intel is on the right track with its Core Ultra processors.

Now, Intel is leaning on its chipmaking prowess to get an edge in scalable silicon-based quantum processors.

In early May, the company announced a breakthrough in the quantum chipmaking market, as company researchers unveiled a 300-millimeter cryogenic probing process. The system “collects high-volume data on the performance of spin qubit devices across whole wafers using complementary metal oxide semiconductor (CMOS) manufacturing techniques,” the company stated in a May 1 white paper.

That development could help speed up quantum computing efforts, allowing industry researchers to gather more data to analyze uniformity, an “important step needed to scale up quantum computers.”

The company also released Tunnel Falls, its newest quantum computing chip, in 2023. The 12-qubit silicon chip should contribute to quantum research and help make executing quantum algorithms and applications faster and more efficient.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

TSM stock is up significantly in 2024, with a 46.7% gain through May 14, as the company continues its industry-leading chip foundry work with high-profile clients like Apple Inc. (AAPL) and Nvidia. The company manufactures approximately 90% of all global advanced chips for artificial intelligence and quantum computing applications, giving it a big leg up as both sectors expand commercially in 2024.

The Taiwan-based company has laid the groundwork for its quantum computing efforts with a five-year strategic partnership with Taiwan’s Ministry of Science and Technology. That partnership is the tentpole in TSM’s plan to use its new cloud computing platform to develop quantum computing applications that will one day be commercially available.

Couple those efforts with TSM’s standing as one of the overall top semiconductor companies in the world – it produces Apple iPhone and Qualcomm mobile chips, among others, and represents about 60% of global third-party chip-manufacturing output. Given the company’s double-digit annual revenue growth, it’s easy to see why Taiwan Semiconductor could be a solid global landing spot for new quantum computing investment dollars.

Source link

Leave A Reply

Please enter your comment!
Please enter your name here