Quantum Computing is Set to Transform Tech: 5 Stocks to Watch
July 20th, 2021
Traditional computers have been making work easier since 1950s, but the enormous data being generated every day requires something significantly faster. Though it is still in its nascent stage, quantum computing holds a lot of promise in the long term, especially in the fields of artificial intelligence, machine learning and gene editing. Unlike traditional computers that use bits -- only one or zero, quantum computers take it to the next level by using quantum bits or qubits -- a zero, a one, or both values simultaneously.
Quantum computing has the ability to perform several types of calculations at a faster speed, taking advantage of quantum mechanics phenomena. These new-age computers use quantum tunneling and quantum entanglement to create multi-dimensional spaces and solve complex problems. Quantum computers can create multi-dimensional spaces to represent very large problems. Users can deploy algorithms that in turn employ quantum wave interference to find solutions in this multi-dimensional space, and translate problems into understandable forms.
Tech bigwigs are investing millions of dollars each year to win the race in developing quantum computing hardware and software infrastructure. And why not? The usability of this new era of computing is vast like the concept itself. It can give us the new generation of electric vehicles through quantum battery technology, facilitate in reducing atmospheric carbon emissions using quantum computing aided material discovery, and help in space traveling and discovering the origins of the universe.
Per the Manomet Current article, the global quantum computing market is expected to reach $1,765 million by 2026 at a CAGR of 30.2%, from $472 million in 2021. With multiple applications in logistics, military, pharmaceuticals, aerospace, utilities, and digital manufacturing, the tech has “quantum” space to grow. The banking and finance sector is already adopting this tech and will boost growth of quantum computing-as-a-service (QCaaS) post-pandemic.
While it is still difficult to encounter pure-play quantum computing companies, bigwigs like IBM, Intel, and Alphabet Inc. GOOGL are investing in quantum computing to provide opportunities to many startups, end-to-end solutions providers, hardware firms (dealing in photonics, trapped ions, superconducting material and semiconducting material), software firms and research labs.
D-Wave, a private Canadian quantum computing company has raised $216 million in funding in 19 rounds since its foundation in 1999. Another developer of quantum integrated circuits, Rigetti Computing has raised $198.5 million in nine rounds. Rigetti has developed a cloud platform called Forest that enables programmers to write quantum algorithms.
5 Stocks to Keep an Eye on
Given the current growth pace of quantum computing, a report from McKinsey & Partners estimates that the technology’s global market value will hit $1 trillion by 2035. In fact, analysts suggest that there could be between 2,000 and 5,000 quantum computers worldwide by 2030. Looking at such prospects, we have shortlisted five stocks that investors can tap to benefit from the quantum space.
NVIDIA Corporation NVDA is a visual computing company. This chipmaker launched cuQuantum SDK, a development platform for simulating quantum circuits on GPU-accelerated systems. The company's expected earnings growth rate for the current year is 58.8% compared with the Zacks Semiconductor - General industry’s projected earnings growth of 25.4%.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 16.7% upward over the past 60 days. Nvidia sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alphabet aka Google’s quantum computer has achieved a solution that could have real-world application, by successfully simulating a simple chemical reaction. The company is expanding its horizon in quantum chemistry, helping scientists understand molecular reactions, leading to produce better batteries, new ways to make fertilizer and improved methods of removing carbon dioxide from the air.
The company's expected earnings growth rate for the current year is 53.1% compared with the Zacks Internet - Services industry’s projected earnings growth of 6.7%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 0.5% upward over the past 60 days. Google flaunts a Zacks Rank #2 (Buy).
Accenture plc ACN is experimenting with cloud-based and hybrid quantum computing and Accenture Labs is working with Biogen to apply quantum computing to accelerate drug discovery. This Zacks Rank #2 company's expected earnings growth rate for the current year is 17.6% compared with the Zacks Consulting Services industry’s projected earnings growth of 15%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.4% upward over the past 60 days.
Microsoft Corporation’s MSFT Quantum team innovates across every layer of the quantum stack, from software and applications to control and devices, and includes the pursuit of fault-tolerant topological qubits that scale toward a general-purpose quantum computer. The company's expected earnings growth rate for the current year is 35.4% compared with the Zacks Computer - Software industry’s projected earnings growth of 1.8%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 5.8% upward over the past 90 days. Microsoft carries a Zacks Rank #3 (Hold).
Amazon.com, Inc.’s AMZN Amazon Braket is a fully-managed quantum computing service that helps researchers and developers get started with the technology to accelerate research and discovery. This Zacks Rank #3 company's expected earnings growth rate for the current year is 37% compared with the Zacks Internet - Commerce industry’s projected earnings growth of 16%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.9% upward over the past 60 days.