Quantum computing is becoming the next big technology to hit the markets, and there are all sorts of ways investors can take advantage of this trend. While there are multiple pure-play quantum computing investments available, those are incredibly risky, as they already have premium valuations despite a high chance of not working out.
As a result, I think investors are better off looking at established tech players investing in quantum computing rather than a pure play. If one of these companies' quantum computing offerings doesn't pan out or a pure play beats a tech giant to this impressive technology, it will still have a base business to lean on.
With that in mind, I've got three big tech companies that look like great buys right now and are competitors in the quantum computing arms race.
1. Alphabet
First is Alphabet (GOOG 1.33%) (GOOGL 1.17%). Alphabet kicked off the latest round of investor interest in the quantum computing arms race last December, when it announced that its Willow quantum computing chip had an effective way to reduce calculation errors. This is critical, as the primary reason why quantum computing hasn't taken over yet is a fundamental problem with the technology.
Traditional computers transmit information in bits, which are 0s and 1s. There really isn't a way to screw this up, as it's indisputable what information is being transmitted when it's either a 0 or a 1. Quantum computing uses qubits to transmit information, and a qubit's value can be described as the probability of being a 0 or a 1. This inherently leads to errors, as there are infinite fractional or decimal numbers between 0 and 1.
As a result, the quantum computing arms race is arguably about solving this error issue, and the company that does it first and can scale the technology will likely be declared the winner.
NASDAQ: GOOGL
Key Data Points
Alphabet made significant strides toward achieving error-free calculations by arranging qubits in a grid within the Willow chip. This gives Alphabet a great head start in the arms race, making it a strong stock to consider.
If quantum computing fails for Alphabet, it will still have its strong advertising segment to continue churning out cash.
2. Nvidia
Next up is Nvidia (NVDA 2.33%). Nvidia is the go-to company for any task that currently needs massive computing power. Its graphics processing units can compute multiple processes in parallel, which makes them suited for any task that requires intense computing power. GPUs are the top choice for AI workloads, and many companies have built facilities with more than 100,000 GPUs in them.
However, if quantum computing becomes widely available, it could harm Nvidia's primary business, as quantum computers will become far more powerful than facilities with truckloads of GPUs in them. CEO Jensen Huang recognizes this and is working to integrate quantum technology with its existing GPU infrastructure by creating QPUs (quantum processing units).
NASDAQ: NVDA
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By integrating with quantum technology rather than being disrupted by it, Nvidia is setting itself up nicely to be a key partner as the quantum computing race heats up. If quantum computing doesn't work out for Nvidia, it will still have a large GPU market to tackle, as quantum computing will be expensive and reserved for only the most intense tasks.
3. Microsoft
Microsoft (MSFT +0.99%) is another key competitor in this race. Its Majorana 1 chip is its initial quantum computing chip. Instead of having multiple chip iterations, Microsoft wanted to build a platform that could scale to 1 million qubits, which it believes is the threshold where useful quantum computing will occur.
While Microsoft incorporated several impressive technologies, the biggest innovation was creating a new state of matter, which it calls a topological state. This gives them better control of the qubits, delivering accurate information on a well-designed system that doesn't require each qubit to be individually tuned.
NASDAQ: MSFT
Key Data Points
This innovation gives Microsoft some street credit in the quantum computing race, but we're still in the early innings of this impressive technology rollout. Even if Microsoft doesn't win the race, its wide-ranging product lineup will continue to do just fine and fund massive quantum computing research in the meantime.
This trio of tech titans is dumping millions (if not billions) of dollars into quantum computing. Their resources are far greater than any of the pure plays, which may give them the edge to win the AI arms race. But if they fail to do so, their base businesses will still drive solid cash flows, making them great long-term investments either way.
