Quantum computing is supposed to be the next big tech trend after the artificial intelligence (AI) race is over. However, that technology is still unproven, although competitors are diligently working toward a commercially viable product. Big tech companies like Amazon (AMZN +3.64%) are also competing in this industry, and Amazon actually has its own quantum computing chip, which it calls Ocelot. However, Amazon wasn't going all-in on that investment; it actually owned shares of one of quantum computing's most impressive upstarts: IonQ (IONQ +8.42%).
At the end of Q2, Amazon owned 854,207 shares of IonQ. However, as of Q3, it no longer owns any shares. This means that Amazon dumped all of its investment in IonQ during Q2, which would be a huge warning flag.
So, should investors follow suit? Or is there something else going on here?
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The IonQ investment wasn't that large in the first place
Although owning nearly a million shares of a company sounds like a lot to individual investors, for Amazon, it was more like a rounding error. At the end of Q2, the value of its IonQ investment totaled about $36.7 million. One of Amazon's other investments, Rivian Automotive (RIVN +3.76%), was worth nearly $2.2 billion. It's also an investor in AMD (AMD +3.77%), and its value was nearly $117 million at the end of Q2 -- another position that it didn't have at the end of Q3.
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Key Data Points
So, part of Amazon's selling could be cleaning up positions it wasn't interested in keeping track of, especially after quantum computing stocks went on an impressive run in Q3.
This is an entirely acceptable thesis, but it could also be Amazon using some of its technological knowledge to determine who the real winners of the quantum computing race will be.
Amazon knows more about quantum computing than the average investor
Because of Amazon's leadership role in the cloud computing world, it must keep tabs on all upcoming computing unit launches to see what's best and what it should buy for its servers. While quantum computing won't replace traditional computing, a hybrid approach is likely the next step for integration once commercially viable technology is available. This means Amazon must keep tabs on the quantum computing industry's biggest players, and IonQ is certainly one of them. With Amazon dumping IonQ's stock, it may know something that individual investors don't, and seeing it sell off its investment is a red flag investors should heed.
Another factor is how far away we are from commercially viable quantum computing. Nearly every company competing in the quantum computing arms race has stated that 2030 will be the year when commercially viable quantum computing is available. That's a long time to hold an investment to see if it works out, and there is a lot of opportunity cost by holding that capital for a large company like Amazon.
Amazon can use some of that money to fund its data center build-out plans, allowing it to capture a larger footprint in the AI realm. Quantum computing will eventually affect this industry, but that may still be years from now. Amazon knows this, and it's likely shifting its investments from quantum computing to AI.
I think investors should take notes from this shift and follow Amazon's lead by dumping their quantum computing investments that have soared in recent months and purchasing AI stocks, which are seeing real sales from the massive AI build-out. Amazon is one of these; even though it's spending a lot on AI data centers, it's quickly selling out of computing usage of these servers.
