Quantum computing stocks have taken investors on a wild roller coaster ride over the past few weeks. These stocks have been incredibly volatile, but one that hasn't been affected despite a huge announcement is Alphabet (GOOG +0.44%) (GOOGL +0.53%). Alphabet isn't as volatile as the pure plays because it isn't dependent on the success of its quantum computing business.
The pure plays must announce every breakthrough to keep potential investors interested, while Alphabet can afford to focus on research and developing the best solution possible. Alphabet rarely makes announcements centered around quantum computing, but when it does, they are absolute bombshells. Alphabet recently announced one of them, and it could be the turning point in the quantum computing realm.
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Alphabet has developed a real-world use for quantum computing
Useful quantum computing is still a few years away, although we're approaching it quickly. Alphabet's announcement surrounding its Willow chip was the completion of the first verifiable algorithm run on a quantum computer. While this may sound like a lot of jargon, it's really a big deal. Up until now, most workloads that ran on quantum computers have had no real-world application. They're being run to see how accurate quantum computing can be and are completely optimized to showcase quantum computing's potential.
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What makes Alphabet's announcement such a big deal is that it ran an out-of-order time correlator algorithm, which can be run on a traditional computer to verify that the output of a quantum computer is correct. The advantage of quantum computing is that it can be done at speeds 13,000 times faster than a traditional computer. That's a huge advantage, and could potentially open up a real-world use for its quantum computing solution.
But is this announcement a checkmate to the entire quantum computing industry?
We're still a long way away from declaring a winner in the quantum computing arms race
It's impossible to know if this is Alphabet showcasing its dominance or making an announcement to prove it's still relevant. Just the other day, IonQ (IONQ 6.68%) announced that it achieved two-qubit gate fidelity of 99.99%. That's far more accurate than Google's Willow chip, and if you use that measuring stick to judge Alphabet's success, you may say it's losing.
It'll take a few years to separate the fakers from the true quantum computing competitors. Still, with Alphabet's strong technology and undisputable resource advantage, it's going to be near the top of the quantum computing arms race. I think this is the ultimate advantage, and could be what Alphabet needs to win the overall race.
IonQ (and some of its pure-play peers) have around $1 billion to $2 billion of funding in the bank account. While several prominent investors (like JPMorgan (JPM 0.45%) and the U.S. government) have announced their willingness to invest in the field, it pales in comparison to what Alphabet can do.
Over the past 12 months, Alphabet has generated around $70 billion in free cash flow.
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That's far more cash than most of the quantum computing pure plays can dream about. If Alphabet wants to outspend everyone in the quantum computing arms race to bring about its vision of what quantum computing could be, then it has the capability of doing that. Money doesn't solve all of the problems in the world, but it can help in a technological arms race. Just look at what's happening with the artificial intelligence data center buildout.
Alphabet clearly sees potential in what quantum computing can do for its business, which is why it's heavily investing in this area. Time will tell if Alphabet's approach turns out to be a winning one, but initial evidence supports that it will be a force to be reckoned with. It's my favorite quantum computing stock to buy right now, and I think it will be one of the big winners in this industry.
