Investing in Quantum Computing: A Smart Choice with a Leading Stock

The excitement surrounding quantum computing may not be as promising as it appears. While there are several emerging companies making headlines, it might be more beneficial for investors to focus on some well-known giants in this innovative field.

Quantum computing has captured significant interest recently. Just six months ago, the total market value of the four largest pure players in quantum computing was only $1.9 billion. Today, this figure has skyrocketed to $15 billion, reaching a peak of $19.2 billion on January 6.

Challenges in the Pure Play Sector

However, I am not going to endorse any of those pure play stocks. While these companies may hold potential for the future, many of them are currently facing challenges that could hinder their growth. Most of their business outcomes remain relatively insignificant at this point, and their high stock prices seem to rely on overly optimistic expectations about the speed of breakthroughs in quantum technology.

Quantum Computing Specialist	Market Cap	Revenues (TTM)	Net Losses (TTM)	Price-to-Sales Ratio (TTM)
IonQ (IONQ -1.70%)	$8.8 billion	$37.5 million	($171.6 million)	233
Rigetti Computing (RGTI -3.31%)	$3.1 billion	$11.9 million	($60.6 million)	258
D-Wave Quantum (QBTS -3.00%)	$1.8 billion	$9.4 million	($73.8 million)	191
Quantum Computing (QUBT -3.03%)	$1.3 billion	$0.4 million	($27.9 million)	3,208

Data collected from FactSet via Finviz.com on February 7, 2025. TTM = trailing 12 months.

While I hope for the success of these quantum innovators, I prefer to put my money into established companies that are also exploring quantum computing.

For these larger corporations, quantum computing is just a small part of their overall business strategy, allowing them to mitigate risks if the anticipated quantum breakthroughs take longer than expected. A well-rounded investment can still generate returns from their main operations even if the quantum computing market takes time to mature.

Now, let's discuss the company that sparked significant enthusiasm in the market recently: Google’s parent company, Alphabet (GOOG -3.19%) (GOOGL -3.27%).

Alphabet’s Key Role in Quantum Computing Advancement

The surge in quantum computing interest in the past few months can be credited to groundbreaking work from Google’s Quantum AI division.

A recent innovation, the Willow chip, showcased advancements in error correction, which could pave the way for more efficient future quantum computers. Notably, Willow completed a benchmark task in under five minutes that would take a digital supercomputer an astounding 10 septillion years to achieve.

It is important to note that this benchmark was designed to highlight the strengths of quantum computing. The random circuit sampling (RCS) test specifically simulates complex quantum processes that are extremely challenging to replicate using classical computers.

According to the Google team, "It checks whether a quantum computer is doing something that couldn't be done on a classical computer. Any team building a quantum computer should check first if it can beat classical computers on RCS."

While the Willow chip achieved remarkable results, the more impressive aspect is its enhanced error correction. Nevertheless, some investors mistakenly interpreted this announcement as a sign that quantum computers are already outperforming classical computers.

As research continues, the Google Quantum AI team is making steady progress. The error-correction feature is just one step in a comprehensive six-step plan, with the next goal being the development of long-lived qubits that offer even better error handling.

This process will take years to materialize, with the final goal being a massive error-corrected quantum computer that operates with millions of qubits, rather than just a few hundred. While there is no set timeline on this, insider discussions suggest that this breakthrough could be 20 years away.

Low-Risk Investment Strategies in Quantum Computing

Alphabet is not the only tech giant making strides in quantum computing. Other major players like IBM, Microsoft, and Nvidia are also advancing their respective quantum research.

These companies are each taking unique approaches to the technology. IBM holds the highest number of quantum technology patents while Microsoft is working on making quantum systems accessible through current cloud platforms. Nvidia, on the other hand, focuses on creating optimized software libraries for quantum software development.

When considering investments in the quantum computing space, any of these large technology firms offer more stability and potential than the smaller players discussed earlier. However, Alphabet presents a particularly appealing option given its current low relative valuation, with a price-to-sales (P/S) ratio of just 6.5. Therefore, for those seeking a promising investment in quantum computing that is available at a reasonable price, Alphabet could be the optimal choice.

Note: Suzanne Frey, an executive at Alphabet, serves on the board of directors for The Motley Fool. The author, Anders Bylund, holds stakes in Alphabet, IBM, and Nvidia. The Motley Fool also has positions in and recommends Alphabet, IBM, Microsoft, and Nvidia.

Investment, Quantum, Computing, Stocks, Technology