Artificial intelligence (AI) may be the technology that is most in focus on Wall Street right now, but quantum computing is the next major tech trend on the horizon. Numerous companies are competing to develop versions of it, and the breakthroughs quantum computers are expected to deliver in a host of areas, from drug development to logistics to materials science, could be breathtaking. Although useful quantum computers are still a few years out, I think investors must respond now and position their portfolios accordingly. The biggest gains for some of the eventual leaders will happen early on, and the sooner investors get on board, the better off they will be.
In my view, these three companies are among those best positioned to benefit when quantum computing goes mainstream.
Image source: Getty Images.
D-Wave Quantum
D-Wave Quantum (QBTS 8.54%) is one of my favorite companies in the sector. While many companies are developing broad-purpose quantum computers, D-Wave is taking a narrower approach. Its primary products use a technology called quantum annealing, which makes them unsuitable for many applications. However, they are ideally suited to handling optimization problems, and those make up a large fraction of the types of tasks that quantum computers will be used for. Moreover, D-Wave already has early iterations of these computing units available, and they are making a real-world impact.
Thanks to a recent acquisition, the company is also pursuing gate-model systems that are more akin to what others in the industry are going after, giving it two chances at success.
NYSE: QBTS
Key Data Points
Recently, D-Wave closed a $20 million deal to sell a system to Florida Atlantic University and inked a $10 million agreement with a Fortune 100 company. This showcases early demand for D-Wave's systems, and if these deals are successful, they could lead to future sales to similar clients.
I think D-Wave has an excellent chance of becoming a viable quantum computing company, making it a solid stock to invest in.
IonQ
IonQ (IONQ 9.59%) is the most popular pure-play quantum computing company, and for good reason. It holds the world record for the most accurate quantum computer -- and overcoming these systems' high error rates is the biggest hurdle standing in the way of quantum computing achieving mainstream use.
Demand for IonQ's offerings is up sharply: Its revenue grew by 755% in Q1, though admittedly, that was from a small base of $7.6 million a year ago to $64.7 million this time. IonQ is selling early-stage systems and partnering with several companies in research agreements, which could likely lead to system sales once the technology has matured enough.
NYSE: IONQ
Key Data Points
IonQ is a great way to take advantage of the coming quantum computing revolution, and its early success should position it at the forefront.
Nvidia
Nvidia (NVDA 4.39%) has specifically told investors that it is not pursuing a quantum processing unit (QPU) to compete directly in this industry. However, it believes that the future for quantum computers will be a hybrid approach that combines them with supercomputers built around traditional accelerated computing chips -- a market that Nvidia dominates.
NASDAQ: NVDA
Key Data Points
To support that hybrid model, Nvidia has developed a version of its leading CUDA software platform for quantum computing, naming it CUDA-Q. It also launched NVQLink, which allows quantum computers to plug into existing computing networks. Recently, it announced a generative AI model known as Ising that helps with error correction in quantum calculations and can boost accuracy significantly. All of these developments point toward Nvidia being a key partner with quantum computing companies as this technology progresses, which keeps it in a position of power.
Furthermore, Nvidia is benefiting from the AI build-out right now, so an investment in Nvidia offers investors short-term upside while also giving them exposure to the long-term potential of quantum computing.
Commercially viable quantum computing will be here quicker than most investors realize, and getting one's portfolio positioned now to take advantage of that industry's growth will be key to maximizing total returns. If you invested in Nvidia at the start of the current AI revolution, then you've profited handsomely. The same could eventually be true with investments in companies like IonQ and D-Wave, although there are no guarantees that any given player will find success in this emerging technological field.
