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.

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.

The post Want to Invest in Quantum Computing? 1 Stock That Is a Great Buy Right Now. appeared first on The Motley Fool Canada.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Anders Bylund has positions in Alphabet, International Business Machines, and Nvidia. The Motley Fool recommends Alphabet, International Business Machines, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Shares of Advanced Micro Devices (NASDAQ: AMD) took a painful hit on Wednesday. Following the chip designer’s fourth-quarter report, the stock fell as much as 10.9% in the morning session. By 1:45 p.m. ET, AMD had recovered slightly to a 7.8% price drop.

Did Tuesday evening’s report change the game for AMD and its investors?

Why AMD’s stock is down today, despite strong Q4 results

AMD actually exceeded analyst expectations across the board in the fourth quarter. Both earnings and revenues landed slightly ahead of the analyst community’s consensus targets. Indeed, the stock rose as much as 5% in Tuesday’s after-hours trading.

But then the earnings call started, and CEO Lisa Su described a gloomier market for artificial intelligence (AI) products than Wall Street had expected. AMD accounts for AI-related products, such as Instinct AI accelerators and EPYC system control processors in the data center segment. That division, and AMD overall, should see revenues falling 7% in the current quarter, as compared to the fourth-quarter results.

Many investors saw this revenue drop as a sharp reversal of AMD’s fortunes. Su’s comments suggest that the first quarter’s data center sales should land near the third-quarter figure, erasing a 9% gain in the fourth-quarter update.

Is AMD’s AI business busted?

AMD’s results have always been quite seasonal, showing stronger sales at the end of the year. It’s just a normal business pattern at work.

At the same time, data center sales now account for more than half of AMD’s total sales, up from 37% in the year-ago quarter. The new Instinct MI300X accelerator is the exclusive engine behind some new AI products from Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT), and AI chips stood for more than US$5 billion of AMD’s 2024 revenues. Su expects “tens of billions of dollars of annual revenue” from these products in the near future.

In other words, last night’s report was not the end of the road for AMD’s AI ambitions. It was just a pretty standard speed bump on a volatile road.

The post Is AMD in Trouble After Wednesday’s Stock Drop? appeared first on The Motley Fool Canada.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Fool contributor Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Advanced Micro Devices, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.

There is one very simple reason I expect SoundHound AI (NASDAQ: SOUN) stock to beat the market over the next seven years. The company has a huge backlog of long-term contracts and other unfilled orders, just waiting to convert into cash-based revenues. Market makers seem to have missed this as-yet untapped source of future sales — and the average contract in SoundHound AI’s backlog pool is a seven-year deal.

The backlog was worth $723 million in the second quarter. That’s up from $682 million in the previous quarter and $339 million in the year-ago period. In the summer of 2023, the backlog was growing at a 20% annual rate. Now, the rate of year-over-year growth has accelerated to 113%. The company is busy securing new contracts.

Meanwhile, SoundHound AI has started to collect subscription fees and other revenues from previously dormant contracts. As a result, its revenues are skyrocketing right now:

SOUN Revenue (TTM) data by YCharts. TTM = trailing 12 months.

Where SoundHound AI’s customers are coming from

So far, most of SoundHound AI’s voice control sales rest on the twin pillars of automotive and restaurant customers.

• Fiat, Chrysler, and Maserati parent Stellantis (NYSE: STLA) is rolling out SoundHound AI voice controls with ChatGPT integration across its brands in Europe and Japan these days. American installations shouldn’t be far behind.
• Recent restaurant deals include popular fast-food chain White Castle, sandwich-slinger Jersey Mike’s, and sports bar chain Beef ‘O’ Brady’s. The names are getting familiar, and you might have already interacted with SoundHound AI’s computer-controlled voice ordering systems.
• The company is making strategic buyouts in the artificial intelligence (AI) space for voice controls and e-commerce integration. These deals should firm up SoundHound AI’s grip on its core target industries while expanding its reach into new sectors.

This little AI expert is going places, and the revenue collection is just getting started. Keep an eye on SoundHound AI’s order backlog as it converts into a proper revenue stream over the next few years. As the company’s sales soar, the stock price should follow suit.

The post Prediction: SoundHound AI Will Soar Over the Next 7 Years. Here’s 1 Reason Why. appeared first on The Motley Fool Canada.

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Fool contributor Anders Bylund has positions in SoundHound AI. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.