Are quantum chips the future of AI?

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

Quantum is coming, is it wise to have exposure?
AMD and Nvidia of a decade ago?
Why are the tech giants all developing this tech?

If that’s enough to get the computer in the quantum realm, read on…

AI Collision 💥

I’ve been covering quantum computing for a while. It’s one of those real game-changer technologies (like AI) that can spark an acceleration of how our world works at unprecedented scale.

But it’s a rocky road, and the companies at the heart of it, are volatile to say the least.

Many had been research companies, private companies, and then in the market euphoria of 2021 many listed on the stock market via the special purpose acquisition company (SPAC) route.

And many tumbled in price through 2022 and 2023. You have to treat these companies for what they are, edge of the bell curve, development, research companies with the potential to change our world.

And when you look through the three most prominent publicly listed pure play quantum companies, the long term chart doesn’t make for some wild viewing.

D-Wave traded under 50 cents in early 2023, IonQ got down to around $3 around the same time and Rigetti stock was languishing at about 30 cents – all in early 2023.

So, today at $11, $25 and $11 respectively is this the beginning or the end for these hugely volatile companies?

Here’s my take on it all…

Remember on 17 December 2024, when I wrote:

…AI and quantum computing go hand in hand – and it will change everything.

In fact, with increasingly good QCs, we’ll see an acceleration in AI – and with an acceleration in AI, we’ll see increasingly good AI.

I bring up quantum computing, because while everyone is still talking about AI, I think that it’s quantum computing companies that could end up being the darlings of the market in 2025.

That was off the back of Google announcing a major development in their own quantum chip program.

And then a little more recently on 24 February when I wrote about Microsoft’s approach to their quantum chip program:

It feels like this quantum story is going to be one of the defining market stories for 2025. And that could mean some of the quantum computing plays in the market end up as some of the most exciting stocks in 2025

Well, the simple question for me comes down to why does Microsoft and Google even have a quantum chip program to begin with?

They’re of course not the only big tech players in quantum. Amazon is developing their “Ocelot” quantum chip and IBM has been developing quantum chips too.

Then there are the other listed players as seen above, D-Wave, Rigetti, IonQ, and then at least a half dozen or so smaller, private companies all working towards the same outcome, fault-tolerant quantum computing chips.

I don’t believe this level of activity, investment and commitment is done without the valid expectation that quantum chips are closer to commercial reality than far away.

It’s why my expectations are that if you have a long term investment horizon, and you have the time to ride the waves and volatility, then buying long term quantum investments today could be like the early days of investing in a company like Nvidia or AMD a decade ago.

It means that companies like Amazon, D-Wave, IonQ, Microsoft, Alphabet, Rigetti, IBM as quantum computing plays may be a smart, long term (and high risk) way to play quantum.

We’ll of course know more over time, but if you’ve got the risk appetite for it, there’s a lot to like about this segment of the market, that I still think is under-appreciated.

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Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

man in black suit jacket and black pants figurine

Boom 📈

Intel (NASDAQ:INTC) up 28%
Micron (NASDAQ:MU) up 18%
Palantir (NASDAQ:PLTR) up 14%

Bust 📉

Teradyne (NASDAQ:TER) down 14%
Apple (NASDAQ:AAPL) down 6%
IBM (NYSE:IBM) down 1%

From the hive mind 🧠

I wrote you about this a couple of weeks ago. Who makes the AI chips controls them. China clearly wants to be the leader in this space. Taiwan is up for grabs, it’s now on the US to get the fabs built and the job done.
AI that can match humans at any task… any task? Let’s say what we’re all thinking then shall we? Mmmm, maybe not any task.
This is a big bet by Intel’s new CEO. Maybe it comes off? The chips (excuse the pun) are stacked against them, but maybe an aggressive new approach is exactly what’s needed.