Growth investors are always looking for the next big story that will offer their portfolios a boost. Last year, artificial intelligence (AI) stocks did the job, and these players still may be very early in their growth story. With today's $200 billion AI market forecast to reach beyond $1 trillion by the end of the decade, these companies could have plenty of bright days ahead.
And on top of this, another technology growth theme is emerging -- one that complements AI and could potentially help AI stocks drive the market higher this year and over the longer term. I'm talking about quantum computing. You may have heard about this technology in recent times and seen huge gains by certain players. For example, leader Rigetti Computing soared 1,400% last year. And this may have prompted you to think about investing in quantum computing stocks.
But if you're not extremely familiar with the technology and players, you might be hesitating. Now here's some great news: You don't have to study up on every player and choose just one or two to potentially score a win, and becoming a quantum computing expert isn't required either. Instead, you can get in on this no-brainer buy and hold on for the long term.
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Why quantum computing could be a game changer
First, though, let's talk quickly about quantum computing. As I said, you don't have to learn everything about it, but it's important to understand why this field could become a game changer. Classical computing uses bits to store and process data, represented as a zero or a one. Quantum computers use qubits to process data, and these qubits can store a zero, a one, or both at the same time. Quantum computing relies on quantum mechanics, a study of the behavior of subatomic particles.
This system can accelerate computing, making it possible to find a solution in five minutes for something that would take a classical computer thousands of years. So quantum computing can solve problems that we can't address today.
Many companies have focused specifically on this technology -- such as Rigetti and Quantum Computing. And market giants also have gotten into the field. For example, Alphabet recently announced key milestones reached by its quantum chip.
Now, let's move along to the way you can easily invest in this hot technology, and that's through an exchange-traded fund (ETF), an asset that allows you to invest in many stocks according to a specific theme such as industry or investment style. In this case, we're going for quantum computing stocks, and the Defiance Quantum ETF (QTUM 0.75%) invests in these players by tracking the BlueStar Machine Learning and Quantum Computing Index.
The Defiance ETF, mimicking the index's composition, also aims to mimic its performance, and that's proven to be positive over the past year. It posted a gain of about 45%. The fund includes more than 70 stocks active in the area, from those intensely focused on quantum computing to tech heavyweights, such as Microsoft and Palantir Technologies, that have established and profitable businesses in other areas too, like software in this case.
Rigetti and D-wave Quantum
Defiance ETF's most heavily weighted holdings are the quantum computing specialists Rigetti and D-wave Quantum, with weightings of 2.4% and 1.9%, respectively. What I like about this fund is though these smaller, higher-risk companies are the biggest holdings, their weightings aren't excessively high, and there are plenty of bigger companies to offer stability in case of volatility.
For example, last month when Nvidia CEO Jensen Huang said useful quantum computers would be ready about 20 years from now, longer than some investors had hoped, stocks like Rigetti and D-wave sank more than 30% in one trading session. Companies like Microsoft are less likely to be as sensitive to these sorts of messages.
So, this ETF offers you the growth of pure play quantum companies along with the safety of tech giants. On top of this, the Defiance ETF doesn't come with high fees -- the expense ratio is 0.4% -- so they aren't likely to hurt your returns over time.
All of this makes this fund a great way to get in on the hot market of quantum computing and potentially benefit from growth while minimizing your risk.
