Quantum computing will change the world someday. Next-generation systems will be able to do certain kinds of advanced math and pattern-matching much faster than today's digital chips. The quantum computing era will change everything you know about encryption and data security, but will also enable incredible innovation in fields such as medical research, weather forecasting, and economics.
So the "quantum advantage" and "quantum supremacy" milestones are coming up, eventually making quantum systems incomparably more powerful for a very specific set of tasks. Problems involving large data sets and extremely precise calculations may look impossible now, but quantum computers may breeze through them quickly.
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It's a long journey, though. Investors recently got very excited about a couple of baby steps toward this future, sending a few quantum computing stocks sky-high in just a few months. As of June 23, early favorites IonQ (IONQ +3.31%) and D-Wave Quantum (QBTS +3.41%) have seen price gains of 471% and 1,188% over the last year, respectively.
But I don't think these are the best bets on quantum computing in 2025. Many of the biggest names in Silicon Valley are funneling their massive resources into quantum research, and I'd much rather hitch my wagon to these innovative powerhouses instead.
Alphabet and IBM are quantum's real power players
My preferred quantum computing investments happen to be the engines behind the recent market uproar.
- Google parent Alphabet (GOOG 0.51%) (GOOGL 0.31%) got the ball rolling with the Willow chip in December 2024. This small quantum computing processor features advanced error correction, which is an important function in the noisy and error-prone quantum computing process. As impressive as the Willow chip's performance was, it's just the second milestone on the 6-step road to quantum supremacy. Each step so far has taken several years.
- Just a couple of weeks ago, IBM (IBM +2.53%) announced the construction of a large quantum computer with its own set of powerful error correction features. Mind you, this system is more of a plan than a real-world project. IBM expects the Starling computer to be available in 2029.
NASDAQ: GOOGL
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Deep pockets matter in this expensive research race
Alphabet and IBM can invest billions of dollars in quantum computing research without breaking a sweat. As the largest company on the pure-play side of the quantum computing fence, IonQ has just $588 million of cash equivalents available. IonQ also burned more than $127 million of cash in 2024, and its cash pile won't last forever.
It may sound crass, but this cash advantage gives IBM and Google a huge leg up on the smaller and deeply unprofitable competition. A single dead-end research project or management misstep could be enough to put the smaller organizations out of business, or at least make them easy targets for deep-discount buyouts. The tech giants don't work under the same sink-or-swim pressure. They can rely on an established portfolio of profitable business operations to get over any quantum computing setbacks. Meanwhile, they can enjoy success in unrelated business operations, like Google's online search and advertising or IBM's consulting services.
NYSE: IBM
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Sleep easy with Alphabet and IBM
Investing in D-Wave and IonQ is very risky in this early stage. Sure, they could evolve into solid sector leaders in due time, but they are also vulnerable to greater risks along the way. At the same time, IBM and Alphabet happen to trade at very reasonable valuation ratios right now.
Picking these tech giants is not an act of high-wire acrobatics, but more like resting on fluffy blankets. And make no mistake -- IBM and Google are right on the leading edge of quantum computing research.
What's not to love in this blend of investor safety and long-term growth opportunity? Long story short, the pure plays can be exciting but the real smart money is on the tech giants.
