Recently, Nvidia (NVDA +5.56%) CEO Jensen Huang made a head-turning, market-moving comment regarding his thoughts on quantum computing. Stocks in this space sold off in response. Even so, I predict that in 2025 quantum computing will emerge as one of the next big waves for investors interested in artificial intelligence (AI).
What did Huang just say about quantum computing?
Huang provided his thoughts on quantum computing applications during a panel discussion at this year's CES conference in Las Vegas. While the Nvidia executive appears bullish on quantum computing's capabilities, he asserted that the technology could be 20 years away from becoming "very useful."
Image Source: Getty Images.
Why his comments matter
The chart below illustrates the price movements of several high-profile quantum computing stocks. Over the last three months, the stock prices for Rigetti Computing, Quantum Computing, D-Wave Quantum, and IonQ have each experienced considerable momentum.
However, all four stocks started witnessing considerable sell-offs beginning right around the same time earlier this month. I personally do not find the timing of Huang's public comments and the cratering share prices of quantum computing stocks to be coincidental.
The dynamics illustrated above underscore a couple of important ideas. First, just because quantum computing stocks rallied in the last few months doesn't necessarily mean they are wise investments. The reality is that all of the companies in the chart above are very early-stage enterprises -- they're barely generating revenue and will remain cash-burning operations for some time.
This leads to my second point. Influential Wall Street personalities and corporate executives can at times move markets with their rhetoric. While Huang's comments regarding quantum computing weren't negative by any means, his views caused many investors to recognize the sobering reality that quantum computing is going to be a long-term opportunity.
As such, those who bought quantum computing stocks throughout November and December have likely been left as unfortunate bag holders.
Should you invest in quantum computing?
Considering that Huang acknowledged that this technology has the potential to help solve increasingly important and sophisticated problems eventually, the overarching question remains: Does quantum computing deserve an allocation in your AI portfolio? In my opinion, there are a few ways to invest in it. The first and most direct way is to buy specific quantum computing stocks.
However, a more insulated approach would be to invest in a quantum computing-themed exchange-traded fund (ETF), such as the Defiance Quantum ETF. ETFs provide some degree of cushioning from volatility since they are comprised of an array of individual stocks. With that said, thematic investing can be a higher-risk option than buying broader market funds, as you'll still be getting exposure to one specific focus area.
In my view, the best and most prudent way to invest in quantum computing would be through the shares of diversified megacap technology companies for which quantum computing is just one area of interest. Companies such as IBM, Alphabet, and Microsoft are all exploring quantum computing as part of their AI road maps, but are not betting their entire futures on the technology. In addition, adjacent businesses that will be integral in the development of quantum chips -- Nvidia or Advanced Micro Devices, for example -- could also be suitable picks.
At the end of the day, I agree with Huang that quantum computing has meaningful potential. However, identifying which specific companies will emerge at the forefront of the trend is nearly impossible to do at this stage, given how far away the technology is from becoming commercialized.
