What would take thousands of years for conventional computers might take mere seconds for a quantum machine.Olemedia/iStockPhoto / Getty Images
From transistor computing to the web and artificial intelligence, the technology sector has always had another “next big thing” to tempt eager investors. This time, it’s quantum computing.
Quantum computing is a big departure from classical computing, which stores data as zeros and ones called “bits.” Today’s computers combine them to make numbers for computation. If you want to do a large sum, you have to create and process those numbers millions of times.
Quantum computers use quantum bits (qubits). These take advantage of a quantum mechanics concept called “superposition,” meaning that a bit can be in multiple states at once. That enables them to calculate vast sums. What would take thousands of years for conventional computers might take mere seconds for a quantum machine.
That’s why Lisa Lambert, chief executive officer of the industry association Quantum Industry Canada, believes the technology is an economic game-changer – especially in areas such as finance, chemistry, life sciences and logistics.
New-York based management consulting firm McKinsey & Co. Inc. has predicted a quantum market worth up to $100-billion within 10 years.
A work in progress
Quantum computing is still an early technology, and real-world applications are scarce.
“We’re just beginning to see the early signals of this technology being useful,” says Shawn Abbott, a partner in Calgary at venture capital company Inovia Capital Inc., which is an investor in Vancouver-based quantum technology company Photonic Inc. “It’s largely aspirational.”
Quantum computing’s big hurdle is error correction. Getting qubits to work together – or even stay in existence for longer than a few thousandths of a second – is a challenge.
“We don’t have those perfect fault-tolerant quantum computers, but we try to do our best with the machines out there,” says Chloé Archambault, partner at Sherbrooke, Que.-based venture capital firm Quantacet Inc., which specializes in funding quantum technology startups.
What this means, in practice, is that valuations of quantum computing companies, based on what investors think about the future viability of a very uncertain market, may be wildly disconnected from financial fundamentals.
“Investing in quantum right now is a gamble,” warns Martin Laforest, another partner at Quantacet. “It’s very volatile – it’s highly, highly speculative, no matter how good or bad the business is.”
Still, quantum companies are making big strides in solving their technical problems, with several of them nudging these machines’ computational abilities higher.
Options for investors
David Williams, equity research analyst in semiconductors at New York-based investment bank and equity research firm Benchmark Company LLC, points out that the number of public quantum stocks is tiny.
“Most of the quantum stocks are generally lumped in with AI stock,” he says.
For retail investors looking for pure-play quantum companies, one option is Burnaby, B.C.-based D-Wave Quantum Inc. QBTS-N. It’s Canada’s quantum flagship, Mr. Williams says, but uses a process called “quantum annealing” that’s different from the gate-based quantum computing that other firms are pursuing. Nevertheless, it has already delivered optimization benefits.
IonQ Inc. IONQ-N is enjoying rising revenue and a strong balance sheet, which Mr. Williams says is important given the hefty capital needed to pursue commercialization in this space.
Rigetti Computing Inc. RGTI-Q uses fast, superconducting qubits. Mr. Williams praises its scalable architecture, and the company has seen ballooning investment returns despite a big drop in revenue in the second quarter.
Quantum Computing Inc. QUBT-Q is a quantum computing platform that can operate at room temperature (whereas some others require extremely cold operating environments) and has a very small revenue base.
The other option is to invest in larger tech companies such as Microsoft Corp. MSFT-Q., Alphabet Inc. GOOGL-Q, and International Business Machines Corp. IBM-N that are innovating in quantum technology. Some of these large tech companies are already collaborating with pure-play quantum technology vendors. Microsoft began collaborating with Photonic in 2023, for example.
It’s also likely that acquisitions will accelerate. “We’re seeing a lot of consolidation,” says Joseph Bahous, investment director at Quantacet.
“The top companies will dominate; others will position themselves to become interesting acquisition targets,” he says.
However, some worry that more investments in a sector that’s already dominating the equities market is dangerous, as the major tech companies are already heavily overrepresented in the S&P 500 index.
“Investors should be concerned about diversification,” says Chris Nicola, president of Vancouver-based Nicola Wealth Management Ltd.
“There are numerous other early-stage technologies that investors may want to consider diversifying in,” he says, such as nuclear energy, AI-driven robotics and life sciences.
“Our view is that there are many near-term tech opportunities relative to quantum computing.”
While quantum computing is no longer purely theoretical and there are real applications delivering value, experts say it’s still at the beginning of a long arc. Making it even more complicated for investors is the fact that each quantum player takes a different approach to how the underlying technology works.
“Start to get curious now,” Ms. Lambert says. “Start with curiosity, because you need to be prepared for this sooner than you think.”