The technology behind quantum computing may be groundbreaking, but ways to invest in the sector include regular stocks and shares. These are the shares of companies which could lead the way as the pioneering technology brings about revolutionary changes.
Investing in quantum computing stocks can provide direct exposure to the companies pioneering the technology. However, as an emerging field, the landscape is still developing, making stock selection challenging. These are the factors to consider when carrying out your analysis.
What Are Quantum Computing Stocks?
Quantum computing stocks refer to publicly traded companies that develop quantum hardware, software, and cloud-based solutions. These firms range from tech giants with quantum research divisions to startups focusing solely on quantum computing innovations.
Leading Quantum Computing Companies
Several companies are at the forefront of quantum computing, making them attractive investment options:
Alphabet
Alphabet, the parent company of Google has been a leader in quantum research, achieving quantum supremacy in 2019 and continuing to push advancements with its Willow chip. The fact that the Willow chip can reduce errors exponentially as it is scaled up — cracks a key challenge in quantum error correction that the field has pursued for almost 30 years.
Tip: Willow performed in under five minutes a standard benchmark computation that a modern supercomputer would take 10,000,000,000,000,000,000,000,000 years to solve.
IBM
IBM has developed quantum cloud services and partnered with enterprises to drive real-world quantum applications. Being a well-established company means that IBM not only has the capital to invest in new quantum computing projects, but also the experience of monetising innovative technologies. IBM has already booked $1 billion in revenue from quantum technology on a cumulative basis.
IonQ
A publicly traded quantum computing company focusing on scalable quantum solutions with cloud integration. IonQ has converted its R&D into revenue-generating quantum computing products such as its Forte system, which currently has 36 algorithmic qubits, and has plans to roll out its Tempo system for data centres — which operates using 96 qubits.
Rigetti Computing
A relative newcomer developing quantum processors and software, Rigetti is competing with larger firms in the field. Rigetti has broad exposure to the sector and builds quantum computers and the superconducting quantum processors that power them. It bridges the gap between traditional computing and quantum computing processes by employing solid-state fabrication which uses existing semiconductor industry standards.
Evaluating Quantum Computing Stocks
When selecting quantum computing stocks, investors should analyse key factors, such as:
- Company Research and Development — Firms investing heavily in R&D are more likely to drive breakthroughs.
- Strategic Partnerships — Collaborations with governments, universities, or major tech firms can indicate long-term viability.
- Financial Health — Companies with strong financials are better positioned to sustain long-term innovation.
How To Invest in Quantum Computing Stocks
Investors can buy quantum computing stocks through brokerage accounts by:
- Researching companies — Studying research reports and news analysis on events such as the formation of new commercial partnerships and technological advances.
- Diversifying investments — Balancing quantum stocks with broader tech exposure.
- Using ETFs — Investing in ETF funds that include multiple quantum computing firms.
- Monitoring market trends — Keeping track of industry-wide developments and corporate advancements to enable diversification of your quantum computing investments across the entire value chain.
Tip: Building a diversified portfolio containing some more stable positions will balance out extreme price moves in more volatile stocks.
Risks of Investing in Quantum Computing Stocks
Investing in quantum computing stocks comes with particular unique risks. Some of these are similar to the risks associated with other growth stocks and some are specific to the sector. They include:
- High Volatility — Price fluctuations due to speculative interest and emerging technology uncertainties can result in excessive price moves which trigger psychological biases in investors.
- Uncertain Profitability — Many companies are still in research phases with no immediate revenue. Even those who are monetising their products can sometimes have stock prices which challenge conventional valuation methods.
- Competitive Landscape — Large tech firms dominate the space, making it challenging for smaller players to thrive.
- Investment Time Horizons — There tends to be a lag between technological breakthroughs and their gaining widespread adoption and being monetised. Buying quantum computing stocks could be a long-term buy-and-hold strategy which ties capital up for an extended period.
- Portfolio Creep — If you’re investing in a huge tech giant such as Google to gain exposure to quantum computing, you will also be gaining exposure to their other business lines which currently play a bigger hand in determining stock prices.
| Pros | Cons |
|---|---|
| Potential for high returns | High volatility |
| Early-mover advantage | Uncertain profitability timeline |
| Industry-backed research | Competitive sector dominated by big tech |
Final thoughts
Quantum computing stocks offer a high-risk, high-return, proposition. The underlying technical landscape is constantly changing and even if it were stable, it would still be challenging to establish which tech stocks will be the most likely winners and losers.
Effective analysis is needed to get your quantum computing portfolio off to the best start and following the golden rules of investing could help you build a diverse portfolio which captures some of the potential gains which are on offer.
Learn more about quantum computing stocks by joining the eToro Academy.
FAQs
- What Is the QuantumComputing Smart Portfolio?
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The QuantumComputing Smart Portfolio on eToro is an innovative, long-term investment portfolio which contains a basket of financial instruments with exposure to the quantum computing sector. Asset selection is determined by a combination of machine learning and input from human analysts.
- Why are so many of the stocks in the quantum computing space large-cap tech giants?
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Tech giants such as Google, IBM, and Microsoft (MSFT) currently dominate the quantum computing space because the technology associated with developing quantum computers is still developing and costly. These firms can finance research and development using income streams from other areas of their business model in the hope that their new projects will at some stage in the future be profit-making.
- How can I avoid buying into quantum computer stocks at the top of a short-term bubble?
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Gradually building a position in quantum computing stocks using the principles of dollar-cost averaging or a recurring investment strategy will help you to gradually build a position in the sector over an extended period of time. That will mean you don’t “beat” the market by buying at the bottom of a dip, but will reduce the risk of you investing all of your capital at the top of the market in what is a relatively volatile sector.
This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments.
This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Not all of the financial instruments and services referred to are offered by eToro and any references to past performance of a financial instrument, index, or a packaged investment product are not, and should not be taken as, a reliable indicator of future results.
eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.