Artificial intelligence (AI) has been a popular investing theme in recent quarters as the technology promises to help businesses gain in efficiency -- and even develop game-changing products and services. The world's top tech companies have invested in this area, and investors have piled into these stocks to share in the potential gains. Today's $200 billion AI market is forecast to reach $1 trillion by the end of the decade, making it a high-growth opportunity.
But AI isn't the only newish technology offering companies and investors the potential for enormous gains down the road. Another complementary technology also has been generating excitement -- and if it reaches its goals it could result in enormous gains for those who invested early. I'm talking about quantum computing, a technology relying on quantum mechanics to tackle problems that are impossible to solve today. The quantum computing market may add more than $1 trillion to the global economy between this year and 2035, according to at least one source.
Companies large and small have been working in the space. Certain players, like Rigetti Computing, for example, are pure plays, specializing in quantum computing. Others, like Microsoft (MSFT +2.11%) and Alphabet, are technology giants that have added quantum computing to their repertoires. And speaking of Microsoft, the software powerhouse just delivered fantastic quantum computing news to investors. Does this make the stock a top quantum computing buy?
Image source: Getty Images.
Quantum computing versus classical computing
As mentioned, many companies are working on quantum computers and related tools. A quantum computer operates differently than a classical computer, and that will eventually allow it to solve a problem in just a few minutes that would take a classical computer thousands of years. Applying quantum mechanics -- or the study of how subatomic particles interact -- quantum computers use qubits to accomplish complex calculations.
Like the classical computer's bits that process data, qubits process data too, but they can scale exponentially.
Now, let's consider the Microsoft news. The technology giant this week announced a new chip that it says will make useful quantum computers a reality "in years, not decades." This is huge news considering experts have said for quite some time that this goal remains far off. For example, Nvidia CEO Jensen Huang back in January said useful quantum computers probably are about 20 years away. Huang's comments sent stocks that focus uniquely on this technology tumbling.
So, if Microsoft is right, this could be a game-changing development. The tech powerhouse introduced Majorana 1, a quantum chip powered by a new type of material: the topoconductor. This material creates a completely new type of matter -- not a solid, liquid, or gas. And Microsoft said this is used to produce a qubit that's stable, fast, and small in size. The company so far has put eight of these on a chip that can potentially scale to 1 million.
"A path to a million qubits"
"Whatever you're doing in the quantum space needs to have a path to a million qubits," Chetan Nayak, a Microsoft technical fellow, said in a post on the Microsoft website. "If it doesn't, you're going to hit a wall before you get to the scale at which you can solve the really important problems that motivate us."
So, Microsoft is on the way to scaling its chip, and its bet to work on this qubit design could be its ticket to victory in the quantum computing space. Does this make Microsoft a top quantum computing buy right now?
NASDAQ: MSFT
Key Data Points
It's way too early to know whether Microsoft will indeed make it to the quantum computing finish line with its new chip -- and if this will happen in years instead of decades. But rivals in the space also are faced with the same uncertainty or risk as we're in the early days of this technology.
The advantage of investing in Microsoft to gain exposure to quantum computing, though, is this company already has a solid track record of earnings growth through other well-established businesses, from software to cloud computing. And Microsoft has seen tremendous growth in AI in recent times, recently reporting an annual revenue run rate for the AI business of $13 billion, which represents a 175% increase from a year ago.
This means Microsoft makes a fantastic investment for both cautious and aggressive investors. With this top stock, you gain access to a company that's proven itself and therefore offers a certain level of safety -- and at the same time, you may benefit from the explosive growth of quantum computing over the long run.
