When Nvidia (NVDA 1.95%) was founded in the 1990s, it was a niche chip designer. Its graphics processing units (GPUs) were engineered to enhance the visuals of video games. Yet, co-founder and CEO Jensen Huang had broader ambitions; he realized that GPUs could be useful in many other applications where parallel processing could be applied.
Fast-forward to today, and Huang's vision has been realized. Nvidia's GPUs now provide the processing power for a host of generative AI platforms -- from OpenAI's ChatGPT to Alphabet's Gemini. By providing the chips that are the backbone of AI infrastructure, Nvidia has evolved from a mid-tier semiconductor company into the world's most valuable enterprise.
The takeaway for investors should be clear: Transformative technologies can begin as niche products before reshaping entire industries. The uses for quantum computing today are also relatively narrow in scope -- but this tech appears to be emerging as one of the next frontiers in the AI realm.
One small-cap contender -- Quantum Computing Inc. (QUBT 4.03%) -- is seeking to disrupt the space. Could it become the next Nvidia?
NASDAQ: QUBT
Key Data Points
Is quantum computing the next GPU?
Just as there were initially few mainstream commercial applications for GPUs, there aren't many so far for quantum computers. The technology remains largely experimental. The machines are complex, costly to build and operate, and have not yet addressed real-world utility at scale. Still, the potential of quantum computing AI is enormous.
Unlike classical computers -- which store and manipulate data in binary form -- quantum computers use qubits, which can also hold values that are probability amplitudes, thanks to a property known as superposition. The result of this is that in some cases, quantum computers can solve problems exponentially faster than even a classical supercomputer.
Experts expect that quantum computing's strengths will be applicable across a host of use cases, from drug discovery and financial risk modeling to cryptography and predicting energy patterns. As such, quantum computing has the potential to unlock trillions of dollars in economic value at scale. Yet, as with GPUs in the 1990s, the gap between the ambitious visions of the pioneers and widespread commercial adoption of the technology remains wide.
Image source: Getty Images.
Analyzing Quantum Computing Inc.
Over the past year, Quantum Computing Inc., or QCi, has surged into the spotlight. Given that its name mirrors one of the tech sector's hottest themes, it's not too surprising that shares of this emerging company have skyrocketed by more than 3,200% in just 12 months. While momentum like that might be tempting to follow, smart investors will want to look beneath the surface first.
QUBT Revenue (TTM) data by YCharts.
So far, QCi is generating minimal revenue, and it continues to burn significant cash, which raises serious doubts about its path to profitability.
In my view, Quantum Computing Inc. shares are benefiting less from the company being in a position of operational strength and more from retail investors' enthusiasm. The company is in the right place at the right time and riding a wave of hype-driven narratives. And the mismatch between QCi's headline-grabbing name and its underlying business fundamentals is quite concerning.
Is Quantum Computing Inc. the next Nvidia?
Nvidia's rise to dominance was never fueled by branding alone. The company brought cutting-edge technology to bear, steadily improved it over the years, and was led by a visionary who recognized how GPUs' uses could extend far beyond gaming and into data centers and AI.
Just as important, the company built a formidable moat by promoting its software architecture, CUDA, to developers. The more widely used CUDA became, the more effectively Nvidia locked developers into its ecosystem.
Quantum Computing Inc. lacks these types of competitive advantages. Its business is showing limited traction, and it's lagging its peers across both hardware and software. Meanwhile, giants like Microsoft, Alphabet, Amazon, and International Business Machines are already investing heavily in quantum computing applications, and they are well-positioned to integrate them into their sprawling ecosystems.
Against this backdrop, Quantum Computing Inc. has essentially become a speculative meme stock favored by day traders chasing quick profits rather than a holding of long-term investors building durable positions.
For those looking to gain exposure to the quantum computing landscape, a more prudent approach would be to invest in established AI leaders with profitable, diversified businesses that are also exploring this rising new technology.
