In recent months, investors have taken a renewed interest in quantum computing. Traditional computer bits can only hold zeros or ones. However, quantum bits, commonly called qubits, can represent any value between zero and one. This advancement enables exponentially faster computing speeds in comparison to traditional computers.
The problem lies with stability, as the more qubits a computer can process, the more error-prone it becomes. For this reason, most industry analysts believe quantum computing is years away from commercial viability.
Fortunately, Google parent Alphabet (GOOGL 0.73%) (GOOG 0.84%) has developed a quantum chip that is a possible game changer for the industry. With that development, Alphabet could be the most successful quantum computing stock in 2025. Here's why.
NASDAQ: GOOGL
Key Data Points
Alphabet and quantum computing
Indeed, consumers and investors know Alphabet best for products like Google Search, YouTube, the Android operating system, and Google Cloud. Nonetheless, the company founded Google Quantum AI in 2012 and has researched the technology and built computers since that time.
Most of the focus on Alphabet in the quantum computing space revolves around Willow, its quantum chip. Willow stands out because it reduces errors as it adds qubits. This stands in contrast to past quantum chips, whose error rates increased as the number of qubits rose.
Additionally, Willow carried out a standard benchmark calculation in around five minutes. This is notable as it estimates that the fastest supercomputers in use today would take 10 septillion (10^25) years to perform the same calculation, a period longer than the entire history of the universe.
Admittedly, quantum computing is a technology in search of real-world applications. Still, the ability to address the error issues bodes well for Alphabet's efforts to make quantum computing both beneficial and profitable.
The numbers on Alphabet's side
Moreover, with commercial viability likely years away, the company's other attributes may take a front seat in 2025 as quantum computing-related efforts remain focused on research and development.
Indeed, a massive and highly profitable digital ad business will probably help fund the company's research. Also, a fast-growing Google Cloud enterprise contributes increasing shares of revenue and has made Alphabet increasingly critical in the IT world with its presence in the cloud and longtime innovation in artificial intelligence (AI).
Thanks to the success of those businesses, Alphabet held $93 billion in liquidity as of the end of the third quarter of 2024. Furthermore, it generated almost $62 billion in free cash flow in the first nine months of 2024 alone. Those assets put Alphabet in a strong position to fund quantum computing and any supporting technologies.
This places it in stark contrast to a quantum computing start-up such as IonQ. Although IonQ's ties to academia have helped it develop faster quantum computers, its considerable losses could mean it runs out of money before it can apply the technology commercially.
Additionally, Alphabet stock rose nearly 40% over the last year, beating the S&P 500. Despite those gains, its P/E ratio at this writing is 26, making it the cheapest stock by that measurement among the "Magnificent Seven."
Winning with Alphabet in 2025
Thanks to Willow and the resources and talent that made it possible, Alphabet could easily become the quantum winner of 2025.
The release of Willow and its success in addressing the error-prone nature of quantum computing chips likely makes the Google parent the leading company in this industry in 2025.
Moreover, even if commercial viability is years away, its lucrative digital advertising and cloud business will probably bolster its massive free cash flow, which will help fund more research in quantum computing and the technologies that should help make it useful for commercial purposes.
Finally, the fact that Alphabet offers the lowest P/E ratio among Magnificent Seven stocks provides investors with an added incentive to buy the stock.
When considering this low valuation and its apparent technical lead, quantum computing investors appear to have the best chance of succeeding with Alphabet in 2025.
