Quantum computing stocks: how to invest in quantum computing

Quantum computing stocks represent the companies researching the next potential great leap forward in computing power. But are they a good investment? Find out here.

• What is quantum computing?
• Should you invest in quantum computing stocks?
• How to start quantum stock trading
• The best quantum stocks

What is quantum computing?

Quantum computing is a developing technology that involves the use of quantum theory to solve problems that are too difficult for classical computers. It is seen as the next great generational leap in computing capability.

According to quantum theory, sub-atomic particles can appear in two places at a single point in time. Quantum computing (QC) uses this, plus some other complicated rules that only exist at a sub-atomic level, to make computers that can do tasks today’s technology can’t.

These tasks generally involve a high degree of mathematical complexity – such as creating physics models – that would take a huge amount of time for a classical computer to complete. Why? Because computers today can only tackle such problems linearly, completing one calculation before moving on to the next.

Quantum computers use the ‘superposition’ of sub-atomic particles to complete calculations non-linearly. This enables them to execute tasks previously considered impossible.

Should you invest in quantum computing stocks?

Quantum computing is an exciting developing technology that can offer interesting investing opportunities. However, it is still very much an emerging trend – and a world powered by quantum technology remains some way off.

Today’s quantum computers remain basic compared to what the technology is predicted to achieve. Many of them lack the power and reliability of classical supercomputers. Like nuclear fusion, each new breakthrough takes us closer to a quantum-enabled future, but we’re not there yet.

One key headwind is the difficulty in producing ‘qubits’, the quantum equivalent of a bit that is at the core of the tech. Different firms have different approaches to solving this problem, and it remains unclear which is the correct approach. But as companies build computers with ever-greater qubit capacity, the technology comes closer to realising its potential.

There has been some recent moves away from focusing on qubit count towards ‘error correction’ when assessing quantum computing power. That’s because powerful computers still make mistakes, making them tricky to use reliably. 

The best quantum computing stocks in 2023

Here are six stocks that are involved in quantum computing, from pure-play companies to major tech firms taking a gamble.

1. IonQ
2. Honeywell
3. Alphabet
4. Amazon
5. IBM
6. Microsoft

IonQ (NYSE:IONQ)

IonQ is a pure-play quantum computing stock that’s focusing on creating ‘trapped ion’ computing power. It currently has one computer in operation but plans to build a network of machines that are accessible via the cloud.

It is funding this process with the proceeds from its 2021 SPAC, which saw it become the first listed pure-play QC stock. The listing helped the company raise over $600 million in funding and gave it a valuation of $2 billion. The stock has seen some significant volatility since, hitting a peak market cap of $6 billion at the end of 2021 before slumping to below $1 billion in 2022.

In 2023, it has rallied significantly – not returning to its previous highs, but growing over 400% from January to September thanks to impressive earnings.

Honeywell (NASDAQ:HON)

Honeywell is an industrial manufacturing company with a diverse set of products across aerospace, construction, performance materials and safety solutions. It is also the majority shareholder of a major QC company that’s expected to land on the markets in the near future: Quantinuum.

Quantinuum was formed in 2021 as a result of Honeywell spinning off its quantum computing division and merging it with Cambridge Quantum Computing. Like IonQ, it uses ‘trapped ion’ technology and has a working computer. However, with 400 employees it is a much larger proposition.

A Quantinuum IPO was expected in 2022, but the poor market for listings saw it delayed. So for now, the best way to take your position is via Honeywell, which maintains a 54% stake in the business.

Amazon (NASDAQ:AMZN)

Away from the pure-play QC stocks, multiple US tech majors are investing heavily in the technology. That includes Amazon, through its AWS Center for Quantum Computing. It also offers access to quantum computing services through its Amazon Braket platform, although it doesn’t yet have its own quantum computer.

As we’ve seen, one issue that quantum computers face is a higher degree of errors than traditional technology, because of the sensitivity of the machines. Amazon, like Alphabet, is attempting to help build a computer that is completely ‘error free’. Whichever company is able to solve the issue first could see a major market boost.

AMZN stock remains some way off its record high and hasn’t fully recovered from the mass market selloff in 2022. It has, however, rejoined the $1 trillion companies club.

Alphabet (NASDAQ:GOOG)

Another heavy hitter that’s involved in quantum technology is Alphabet, which in 2019 announced that its Quantum AI division had achieved ‘quantum superiority’ via its computer, Sycamore.

The company has since opened a quantum campus in Santa Barbara, California. The campus has the aim of creating a new quantum computer by the end of the decade. It has also spun out its other quantum division, Sandbox AQ – with Alphabet retaining no stake in the business.

Of course, for now, quantum computing has little impact on Alphabet’s share price. Instead, another frontier technology, AI, saw notable volatility for the stock in early 2023.

IBM (NYSE:IBM)

IBM has several significant plays in the quantum space. It launched an early example of the technology in 2016, making it available via the cloud. Having followed that up with several new developments, in 2021 it announced the launch of ‘Eagle’, the world’s first 100-qubit quantum computer.

In 2022 it announced the 433-qubit Osprey computing chip, and expects to break the 1,000-qubit milestone in late 2023. IBM has also claimed that it will deliver ‘quantum advantage’ – a computer capable of completing tasks impossible on a modern supercomputer – at some point this year.

Unlike many big tech firms, IBM shares delivered growth in 2022, ending the year at $140. However, it also failed to join 2023’s rally – struggling at the beginning of the year, before recovering in recent months.

Microsoft (NASDAQ:MSFT)

Microsoft doesn’t have its own quantum computer yet but is involved in the technology at almost every other level. Microsoft Azure has partnered with IonQ and Quantinuum to offer access to quantum computing services via the cloud, and the company has developed a new programming language plus tech and hardware to support future growth.

It has also announced plans to build its very own quantum computer, although it hasn’t elaborated on them since.

Like Alphabet and Amazon, QC isn’t a key revenue driver for Microsoft for the time being. But if it’s able to make the next great breakthrough in the space, that may be set to change.