Disruption isn't a dirty word for investors. Sure, some companies can fade away as their businesses are rendered obsolete by new technologies. However, others flourish and make smart investors a lot of money over time.
I believe we're currently in the early stages of two massive disruptions. Artificial intelligence (AI) holds the potential to transform our world in too many ways to count. Quantum computing could accelerate AI advances while also revolutionizing finance, healthcare, logistics, and more.
Although these are distinct disruptive technologies, you don't have to invest in them separately. Here are my picks for the three best stocks to buy now to profit from both AI and quantum computing.
Image source: Getty Images.
1. Alphabet
Google parent Alphabet (GOOG 0.52%) (GOOGL 0.46%) has been a pioneer in AI for years. The company developed the "T" (transformers) in ChatGPT. Its 2014 acquisition of DeepMind was, in retrospect, a pivotal move. Today, Google Gemini Pro ranks among the world's most powerful large language models (LLMs).
Alphabet has multiple ways to profit from AI. Google Cloud is the fastest-growing major cloud services provider thanks to a massive AI tailwind. Google Search and YouTube use AI to boost ad revenue. Waymo is a leader in autonomous ride-hailing (robotaxis).
But the company is also a major player in quantum computing. Google Quantum AI (note that both disruptive technologies are in the unit's name) has already notched two key quantum computing milestones. Its Sycamore chip achieved quantum supremacy (solving a problem in relatively short order that would take the most powerful classical computer an exceptionally long time) in 2019. The unit made a giant leap in quantum error correction (reducing errors by increasing the cubits) in 2023.
I think it's a good bet that Alphabet will be one of the biggest winners in both AI and quantum computing over the long run. But this stock isn't a highly risky bet, in my view. The company is on track to generate close to $400 billion in revenue and more than $100 billion in profits this year.
2. Microsoft
Microsoft (MSFT -0.40%) arguably struck one of the best deals in business history by partnering with ChatGPT creator OpenAI back in 2022. The longtime technology giant has integrated OpenAI's AI models throughout its software suite.
Like Alphabet, Microsoft is poised to benefit as organizations build and deploy AI applications in the cloud. Its Azure is the second-largest cloud services platform, behind only Amazon Web Services (AWS).
Also like Alphabet, Microsoft is investing heavily in quantum computing. Earlier this year, the company introduced its Majorana 1 quantum chip, which uses a new type of material called a topoconductor. Microsoft thinks that topoconductors will pave the way for highly scalable, powerful quantum computers.
Microsoft technical fellow Chetan Nayak believes that topoconductors might be the "transistor for the quantum age." If he's right, the company that dominated the PC software market could also dominate the quantum computing market.
3. Nvidia
Which company is the most essential player in AI today? There's a strong argument that it's Nvidia (NVDA -0.85%). The company's graphics processing units (GPUs) remain in a league of their own in powering AI systems.
Nvidia's customers include Alphabet and Microsoft, both of which use its GPUs extensively in their cloud platforms. And while rivals are trying desperately to knock Nvidia off its perch, the company's fast-paced development of new AI chips seems likely to keep it on top for years to come.
However, Nvidia isn't developing quantum computers. How is investing in it a smart way to profit from both AI and quantum computing? The company is trying to make it easier for others to advance their quantum computing efforts through its NVIDIA Accelerated Quantum Computing (NVAQC) Research Center. Nvidia is also pairing its GPUs with quantum chips for a hybrid quantum-classical computing approach.
Back in the gold rush days, the providers of picks and shovels often made more money than the gold miners themselves. Nvidia is positioning itself to be the pick-and-shovel investment of the quantum computing era.
