Investing in Quantum Computing Stocks
On October 14, 2024, we read that Zapata Computing Holdings Inc. has ceased operations. This stock closed today at eight cents, which is a $9.92 per-share loss from a recent high of $10.00 per share when they went public.
Updated: September 10, 2024
Who is working in Quantum Computing?
These are US-listed, publicly traded firms that have a meaningful focus on quantum computing. Our industry categorization:
If you see a firm omitted from our list, please let us know. If helpful, you get a T-shirt.
Software and Services
Hardware & Software
Networking
Cloud Access Provider
Stock warrants
Stock option chains
These are US-listed, publicly traded firms that have a meaningful focus on quantum computing. Our industry categorization:
- Labor-based services (operations)
- Consulting services (expertise, deployment, systems integration)
- Providing cloud access (to hardware, software and applications)
- Facilities-provider (housing systems)
- Hardware
- Software (operating systems, middleware, databases, and applications)
- Networking (cabling, LAN, WAN & Satellite)
If you see a firm omitted from our list, please let us know. If helpful, you get a T-shirt.
Software and Services
- Zapata Computing Holdings Inc. ZPTA
- Accenture ACN
- Quantum Computing Inc., QUBT
Hardware & Software
- IonQ, Inc., IONQ - acquired Entangled Networks
- Rigetti Computing, Inc., RGTI
- D-Wave Quantum Inc., QBTS
- Quantinuum (merger between Cambridge CQC and Honeywell, majority owned by Honeywell) HON
- IBM Corporation & IBM Research IBM
Networking
- Arqit Quantum Inc., ARQQ
- Toshiba (Japan) - secure communications & software
- AT&T and Verizon (secure communications)
Cloud Access Provider
- Microsoft Corporation & Microsoft Azure MSFT
- Alphabet Inc. & Quantum Research Lab GOOG
- Amazon.doc & Bra-Ket AMZN
Stock warrants
- ARQQW
- RGTIW
- QBTS-WT
- IONQ-WT
- ZPTAW (warrants, but no options)
Stock option chains
- HON
- IBM
- MSFT
- GOOG
- AMZN
- ACN
- QBTS
- IONQ
- RGTI
- ARQQ
What is our focus in quantum computing?
We are a member of the Quantum Economic Development - Consortium (QED-C) where many of these firms network and collaborate. We are close to the Chicago Quantum Exchange (at the University of Chicago) and we attended their public/government conference in 2018. That day inspired us on this journey.
We are not physicists, but we understand investments, financial analysis, and enterprise information technology.
We build expertise in understanding the economics of quantum computing, the trajectory of the industry, and the firms that have a significant role in quantum computing.
We help clients understand the economics of their business, the trajectory of their development, and ultimately, whether their stocks should be invested long, short, or avoided.
We are a member of the Quantum Economic Development - Consortium (QED-C) where many of these firms network and collaborate. We are close to the Chicago Quantum Exchange (at the University of Chicago) and we attended their public/government conference in 2018. That day inspired us on this journey.
We are not physicists, but we understand investments, financial analysis, and enterprise information technology.
We build expertise in understanding the economics of quantum computing, the trajectory of the industry, and the firms that have a significant role in quantum computing.
We help clients understand the economics of their business, the trajectory of their development, and ultimately, whether their stocks should be invested long, short, or avoided.
How we serve clients in this space
Paid clients have an opportunity to learn about:
For clients interested in putting capital to work in support of quantum computing, we will set up a separately managed account that invests in publicly traded, US-listed, quantum computing companies (preferred, common, warrants and debt). The expense ratio is similar to buying a mutual fund, 1.5% per year after a $1,000 setup fee. We are a non-discretionary investment advisor, so we work through a trusted, custodial agent like your broker, your trust administrator, or The Charles Schwab Corporation.
Paid clients have an opportunity to learn about:
- Quantum computing ecosystem (paid talks & research papers)
- Using the technology (we have coded for an R&D client)
- The companies that work in this sub-category of information technology (paid talks, research, in-depth company analysis)
- Investment advice on quantum computing companies (long, short, or avoid).
- We may be able to work as a buyers-agent or value-added-reseller.
For clients interested in putting capital to work in support of quantum computing, we will set up a separately managed account that invests in publicly traded, US-listed, quantum computing companies (preferred, common, warrants and debt). The expense ratio is similar to buying a mutual fund, 1.5% per year after a $1,000 setup fee. We are a non-discretionary investment advisor, so we work through a trusted, custodial agent like your broker, your trust administrator, or The Charles Schwab Corporation.
The economics of Quantum Computing
Costs are significant.
Today, the quantum computing industry is spending money to develop a new capability.
It performs primary research and high-end engineering. It conducts test and development work. It markets and evangelizes early successes and use cases. The industry players are each investing millions of dollars, or in some cases hundreds of millions of dollars annually, along with scarce human capital.
IBM groups quantum computing in their Innovation segment and IBM Research. In the latest 10-Q, they suggest quantum and AI are reducing their segment profitability.
Honeywell spun off its quantum computing business with $300 million dollars of capital, and has raised $650 million since 2021 to fund it, including $60 mm recently sold to individual investors as unregistered securities.
D-Wave Systems had a major dilution event where they raised fresh capital about a year ago after significantly cutting expenses the year before.
Companies will continue to raise and spend fresh capital on quantum computing research and development before it becomes commercially profitable.
Revenues are immaterial.
As far as we can tell, revenues are not material when compared to the costs. Revenues are coming in from corporate early adopters, students, researchers, universities, government agencies, and taxing authorities (in tax-loss carry-forwards).
Risks are significant.
Other Considerations
Costs are significant.
Today, the quantum computing industry is spending money to develop a new capability.
It performs primary research and high-end engineering. It conducts test and development work. It markets and evangelizes early successes and use cases. The industry players are each investing millions of dollars, or in some cases hundreds of millions of dollars annually, along with scarce human capital.
IBM groups quantum computing in their Innovation segment and IBM Research. In the latest 10-Q, they suggest quantum and AI are reducing their segment profitability.
Honeywell spun off its quantum computing business with $300 million dollars of capital, and has raised $650 million since 2021 to fund it, including $60 mm recently sold to individual investors as unregistered securities.
D-Wave Systems had a major dilution event where they raised fresh capital about a year ago after significantly cutting expenses the year before.
Companies will continue to raise and spend fresh capital on quantum computing research and development before it becomes commercially profitable.
Revenues are immaterial.
As far as we can tell, revenues are not material when compared to the costs. Revenues are coming in from corporate early adopters, students, researchers, universities, government agencies, and taxing authorities (in tax-loss carry-forwards).
Risks are significant.
- Risk 1: the money (and talent) may run out
- Risk 2: the technology may never become commercially useful to a large enough user community.
- Risk 3: not sure which quantum technology standard will become one of the default standards. We think about the hardware and software wars that yielded us Android and iOS in smart phones, or Microsoft Windows, GoogleChromeOS, macOS, openSUSE, UBUNTU, LINUX, UNIX and IBM zOS on computers / servers.
- Risk 4: the primary applications are outside of computing (navigation, sensing & secure communications).
- Risk 5: national security risks outweigh free trade, and the technology gets locked down (e.g., hacking encryption)
- Risk 6: current investments by the U.S. Federal Government dry up, causing industry-wide dislocation
Other Considerations
- Talent is scarce and supply chains are globally stretched.
- There are many other companies that are building their business that are not yet listed on US stock exchanges.
- Large companies with early-stage quantum computing programs (e.g., creating quantum applications) that will take advantage of quantum computing in their business, either by creating new capabilities or improved optimization.
- Honeywell, spun out their quantum computing business with a quantum consultancy in 2021.
- How to buy quantum computing stocks: very carefully. These pure-play companies are in the experimental phase and have not scaled into commercial production. These companies will need to raise and spend capital on developing quantum computers on scale, and there is a risk that they will either not succeed, or that their products will not be commercially acceptable. Buyer beware.
Real-life story
I have a physicist acquaintance who messaged/texted/called me for months to raise money for his quantum computing R&D start-up firm. Part of his job was finding equity investors to pay corporate expenses in a race against time. He started by asking for millions of dollars and offering a chance to get in before a looming valuation increase. After a few discussions, he said he would settle for a ten thousand dollar investment.
Private equity is a different investment model than we are used to. For that, we rely on professional venture capital or private equity firms.
Summary of quantum computing economics
One thing is certain, quantum computing is a long-term investment in a potential 'jackpot' situation. It was positioned before artificial intelligence, but AI has surpassed it as a technology with a commercial use case. Just ask the 10-th grade teacher who says Chat GPT, or Elon Musk's fully self driving vehicles, chatbots, AI spouses, and AI-generated images on social media. This was possible because AI requires large numbers of currently available hardware technologies and energy to power it, while quantum computing still isn't available at scale.
The top five companies with a material focus on quantum computing are some of the most valuable companies in the world. They have the resources and capabilities to invest for the long-term.
I have a physicist acquaintance who messaged/texted/called me for months to raise money for his quantum computing R&D start-up firm. Part of his job was finding equity investors to pay corporate expenses in a race against time. He started by asking for millions of dollars and offering a chance to get in before a looming valuation increase. After a few discussions, he said he would settle for a ten thousand dollar investment.
Private equity is a different investment model than we are used to. For that, we rely on professional venture capital or private equity firms.
Summary of quantum computing economics
One thing is certain, quantum computing is a long-term investment in a potential 'jackpot' situation. It was positioned before artificial intelligence, but AI has surpassed it as a technology with a commercial use case. Just ask the 10-th grade teacher who says Chat GPT, or Elon Musk's fully self driving vehicles, chatbots, AI spouses, and AI-generated images on social media. This was possible because AI requires large numbers of currently available hardware technologies and energy to power it, while quantum computing still isn't available at scale.
The top five companies with a material focus on quantum computing are some of the most valuable companies in the world. They have the resources and capabilities to invest for the long-term.
Defense Contractors
Defense contractors often have an exposure to quantum technologies, but not quantum computing. Their focus is typically outside the quantum computing space unless they are participating in a US program or as a private equity investor.
Defense contractors often have an exposure to quantum technologies, but not quantum computing. Their focus is typically outside the quantum computing space unless they are participating in a US program or as a private equity investor.
A joke:
So, one atom fuels an atomic clock
What does one qubit fuel?
It's a coin toss.
So, one atom fuels an atomic clock
What does one qubit fuel?
It's a coin toss.
Private Equity / Private Companies (not in scope)
- PSIQuantum
- Atom Computing
- Cold Quantum
- Xanadu Quantum Technologies Inc.
- Quantum Circuits Inc.
- Alice & Bob - escaping decoherence, the home of cat qubits
- Universal Quant
- Infleqtion
- C12 Quantum Electronics
- HRL Quantum
- Phasecraft (quantum algorithms and software)
- LPS
- Universal Quantum (home of the million qubit quantum computer quest)
European, English, Japanese, Korea, Singapore & Australia firms (not in scope)
- Q-CTRL - Australian firm working to make quantum computers work better (software, engineering)
- Alpine Quantum Technologies (AQT) - Austrian firm that builds and sells quantum computers from COTS components
- Toshiba Corporation (software simulation and secure communications)
- British Telecom (secure communications)
- IDQ (Swiss firm, secure communications)
- Atlantic quantum (superconductor quantum computer fabrication facility in Sweden)
- Horizon Quantum
- Parity QC (Innsbruck and Hamburg)
- Oxford Quantum Circuits
- Pasqal, Paris, France (neutral atom, trapped by laser beams) spun out from Institut d'Optique
Chinese firms (not in scope)
- Alibaba Group Holding cancelled their quantum computing program (specifically its quantum computing research lab), as announced on Bloomberg on November 7, 2023 for cost cutting.
- Tencent Holdings Limited, TCEHY, participates, but with a data analytics focus (not specifically quantum).
- Baidu (quantum computing institute focused on applications and use-cases)
Source: Yahoo Finance, September 19, 2023 at 152100 (or 3:21pm)
We maintain a Yahoo Finance portfolio of these stocks, and are constantly adding to the list. We will send you a screenshot upon reasonable request to [email protected].