Quantum computing has been generating a lot of buzz in recent years. The nascent technology could be a way to unlock computing power in a way the world has never seen before, allowing for machines that can handle some unusual and wildly complex types of computations that are beyond the capacities of today's fastest supercomputers. This could result in major advances in areas from drug discovery to materials science to cryptography, among other fields.
But at this point, the technology by and large is not commercially viable.
Current quantum computers are vastly more error-prone than classical machines. Traditional computers and digital systems store and manipulate data in the form of bits, which can have only two states: 0 or 1. Quantum computers perform their calculations using qubits, which can briefly occupy a state called superposition, in which they have values that are neither 1 nor 0, but complex probability amplitudes.
That does not mean qubits are taking on values between 1 and 0 -- the reality is frankly much odder and not at all intuitive to grasp, and we don't need to dig further into the details here. But when a calculation using qubits is complete, those probabilities resolve, and each qubit does land on a value of either 1 or 0.
The key difficulty, though, is that qubits are extremely sensitive to interference from even the tiniest of outside forces. A stray particle interaction can cause a qubit that would correctly resolve to 0 to wind up as 1 instead -- changing the value of the whole result. Reducing the frequency of such errors and correcting them when they do occur are two of the chief challenges facing every organization trying to develop a viable quantum computing system.
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Think of a qubit like a spinning coin: A tiny change in the environment around it might cause it to land on heads rather than tails. At the same time, groups of qubits need to be linked through entanglement to be able to work on processing problems together, which only adds to the complexity, because they need to be kept stable relative to each other.
In other words, it's not about keeping just one spinning coin safe from outside interference, it's about trying to keep hundreds or thousands of spinning coins balanced so they can interact with one another. One wobble due to something like a change in temperature or a tiny vibration could cause the system to deliver an incorrect result.
The numerous companies pursuing quantum computing are looking at different ways to solve those problems and eventually create a powerful, commercially viable, fault-tolerant quantum computer -- one that reduces the level of errors to something manageable, and that can recognize and correct those that do occur. Most of the pure plays have little revenue, no profits, and negative free cash flow, making them extremely risky bets.
However, there are other ways to invest in the space, because some big tech companies with well-established core businesses and deep pockets are also chasing the technology. From where I sit, these three larger quantum stocks currently seem like buys.
IBM
IBM (IBM +0.49%) is one of the most intriguing large companies involved in quantum computing. It's not just dabbling in the field, either -- it's making the technology a central part of its strategy.
Today, it's developing two quantum chips. Nighthawk is its workhorse chip, and the one the company is planning to potentially use to run advanced simulations within IBM Cloud in the next few years. It says it's on track to have the chip perform calculations with up to 10,000 logic gates by 2027.
At the same time, it is working on a more experimental chip called Loon that could help it create the world's first large-scale fault-tolerant quantum supercomputer.
Besides its chips, the company is focused on developing error mitigation tools that can improve the accuracy of quantum computers' calculations. It has also created a strong software stack with its Qiskit solution, which will help programmers make use of quantum computers for real workloads. This all sets IBM up to be a potentially big winner as the technology matures.
Nvidia and Alphabet
Neither Nvidia (NVDA 0.10%) nor Alphabet (GOOGL +0.96%)(GOOG +1.05%) are particularly well known for their positions in quantum computing, but they are very much involved in it.
Alphabet made a breakthrough in late 2024 with its Willow chip, which was able to exponentially reduce errors as it added more qubits. Typically, the more qubits a system uses, the more errors you get, so this was a huge feat.
NASDAQ: NVDA
Key Data Points
The company isn't issuing press releases with every quantum advancement, but you can be sure it is doing a lot of work behind the scenes. And after lagging behind in artificial intelligence (AI) early during the trend, it quickly made advancements and caught up to the leaders, which demonstrates why its R&D strengths should not be underestimated.
And then there's Nvidia.
Its graphics processing units (GPUs) are arguably the world's most powerful parallel processors, but the company isn't attempting to develop its own quantum chip in-house. Instead, it's working to provide the systems that will bridge traditional and quantum computing.
It recently announced NVQLink, which allows quantum processors (QPUs) to be linked with clusters of GPUs to control the quantum machines effectively and help with real-time error correction. Nvidia is also developing an open-source software platform for quantum computing called CUDA-Q, based on its CUDA platform for GPUs, and it has introduced a hybrid quantum-traditional system that combines CPUs (central processing units), GPUs, and QPUs.
Nvidia also has a boatload of cash on its books, so if any pure plays start making big strides, it has the wherewithal to scoop them up via acquisitions if it wanted to.
