Quantum computing is a hot topic these days. Six months ago, the four largest pure play stocks in this market added up to a total market value of US$1.9 billion. Today, their combined market value has soared to US$15 billion. And that’s not even a peak value — the tally topped out at US$19.2 billion on Jan. 6.
It’s too early to pick a winner among pure play experts
But I’m not here to recommend the stocks in this quartet. These four names may become quantum computing giants in the long run, but they seem more likely to run out of gas and crumble along the way. Their business results are largely immaterial so far, and those beefy stock valuations appear to be based on unrealistic assumptions of rapid progress in quantum computing technologies.
| Quantum Computing Specialist | Market Cap | Revenues (TTM) | Net Losses (TTM) | Price-to-Sales Ratio (TTM) |
|---|---|---|---|---|
| IonQ (NYSE: IONQ) | $8.8 billion | $37.5 million | ($171.6 million) | 233 |
| Rigetti Computing (NASDAQ: RGTI) | $3.1 billion | $11.9 million | ($60.6 million) | 258 |
| D-Wave Quantum (NYSE: QBTS) | $1.8 billion | $9.4 million | ($73.8 million) | 191 |
| Quantum Computing (NASDAQ: QUBT) | $1.3 billion | $0.4 million | ($27.9 million) | 3,208 |
Data collected from FactSet via Finviz.com on Feb. 7, 2025. TTM = trailing 12 months. All dollar amounts in U.S. dollars.
I wish the best of luck to these quantum computing experts and their investors. However, I would much rather invest in more mature business titans that also have an interest in quantum computing technologies.
Getting the research right is a sink-or-swim issue for the pure play sector experts, while larger companies can treat this potentially game-changing technology as a minor side gig. And if the quantum revolution isn’t coming over the next few years, I can still enjoy gains from their main lines of business instead.
So let’s move on to the company that inspired the recent market surge — Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
How Google’s Willow chip inspired a quick quantum boom
The quantum computing mania in recent months started with a breakthrough by the Google Quantum AI group.
Their new Willow chip showed a promising step forward in error correction, suggesting that future products might be able to overcome noisy results by using more so-called qubit processing units. The headline-writing part of that progress report was Willow’s ability to run a benchmark process in less than five minutes. A digital supercomputer would take 10 septillion years to achieve the same result.
It should be said that the benchmark test was tailor-made to make quantum computers look good. The random circuit sampling (RCS) test essentially simulates a moderately complex quantum computing process in a way that’s very hard to do with classical computers.
“It checks whether a quantum computer is doing something that couldn’t be done on a classical computer,” the Google team explained. “Any team building a quantum computer should check first if it can beat classical computers on RCS.”
So the actual quantum computing functions of the Willow chip did some quantum computing, which would be ridiculously hard to emulate with old-school technologies. I’m more impressed by the boosted error correction, honestly.
But many investors saw this announcement as a sign of quantum computers running laps around normal computers right now. Jumping to conclusions may be great exercise, but it can be dangerous to your stock portfolio.
Meanwhile, the Google Quantum AI team keeps doing their research. The error-correction function was step two in a six-step roadmap where the next advancement should be long-lived qubits with even better error handling.
That will take years. The final signpost on that map is a large error-corrected quantum computer with millions of qubits instead of hundreds. The group hasn’t set a deadline for this game-changing development, but other rumblings in the quantum computing sphere suggest that it should be about 20 years away.
How to make low-risk investments in quantum computing
Alphabet’s Google is far from the only technology titan working on advanced quantum computing research.
They’re taking different paths forward. IBM (NYSE: IBM) has more quantum-related technology patents than anybody. Microsoft (NASDAQ: MSFT) is focusing on making quantum computing systems usable via today’s cloud computing platforms. Nvidia (NASDAQ: NVDA) is building optimized software libraries for quantum-based software development.
Any of these tech giants strike me as better quantum computing investments than the smaller upstarts discussed above. But none of them can compete with Alphabet’s bargain-bin valuation today. For instance, its price-to-sales (P/S) ratio stops at 6.5. So if you’re looking for a future quantum computing heavyweight that also happens to be a great buy right now, Alphabet seems to tick both boxes.
