Quantum computing could be a big deal once the technology matures. BCG estimates that industry-wide quantum computing revenue could reach $170 billion sometime after 2040, with quantum hardware and software delivering as much as $850 billion of annual value for end users. Potential use cases include pharmaceutical drug discovery, finance simulation, logistics network optimization, and advertising optimization, to name a few.
Quantum computing takes advantage of the probabilistic properties to quantum mechanics. While a traditional computing bit can be in one of two states at any given time, a quantum bit or qubit exists in some combination of two states. This property enables quantum computers to complete certain types of computations exponentially faster than traditional computers.
While quantum computing has immense potential, the technology is not yet commercially viable. No one has built a quantum computer that's capable of solving a real-world problem faster than a traditional computer. One big problem is error correction. Qubits are fragile, and this fragility can introduce errors and completely derail a computation. BCG's estimates for the quantum computing industry after 2040 hinge on full-scale error correction being solved.
Quantum is already a big business
While quantum computing isn't yet commercially viable, companies and organizations are signing deals to explore the technology for future applications. One of the biggest beneficiaries so far is International Business Machines (IBM 0.24%), a quantum computing pioneer.
NYSE: IBM
Key Data Points
IBM has been building quantum computers for decades, and it's deployed nearly 80 externally available quantum systems, far more than any of its competitors. This includes 13 quantum computers with more than 100 qubits that are currently operational. IBM has also developed Qiskit, a software development kit that leads the way in terms of adoption. Thousands of projects depend on Qiskit, making it the most popular quantum computing platform.
Since the beginning of 2017, IBM has booked nearly $1 billion worth of business related to its quantum computing efforts. Even before quantum computing becomes truly useful, there will be plenty of money to be made for industry players. BCG estimates that annual industry-wide quantum computing revenue could reach $2 billion prior to 2030, then jump tenfold over the following decade as the technology marches toward commercial viability. IBM is positioned to generate a big chunk of that expected revenue.
IBM's quantum computing revenue is going to ramp slowly as more companies explore the technology, but it has the potential to explode in the future if and when the technology becomes genuinely useful. By 2028, IBM expects to demonstrate the first error-corrected quantum computer. Following that achievement, the task will be to scale up. Sometime after 2033, IBM sees quantum computers reaching thousands of qubits. True commercial viability would come later, although there are no guarantees.
The quantum computing stock to own
If commercial viability is still at least a decade away, pure play quantum computing stocks like IonQ or Rigetti Computing are risky bets. These money-losing companies will need to survive long enough to reap the benefits of the quantum computing revolution.
IBM, on the other hand, is thriving. The company expects to grow revenue by more than 5% annually going forward, with free cash flow growing a bit faster. The company's hybrid cloud computing and AI businesses are booming, and high-margin software is pushing up profit margins. If quantum computing never becomes commercially viable or takes even longer than expected, IBM can still deliver solid returns for shareholders.
For long-term investors itching to gain exposure to quantum computing, IBM is a low-risk way to bet on the potentially revolutionary technology.
