The stark warning came from one of the tech world’s most prominent CEOs. Alphabet CEO Sundar Pichai told an audience at the World Economic Forum in Davos, Switzerland, three years ago that quantum computers have the power to transform humanity’s understanding of the natural world and enable scientists to discover new medicines and better batteries, among other things to develop . But with this great promise comes a danger: a commercially viable quantum computer is widely expected to be able to penetrate the encryption techniques that secure the world’s financial and communications networks. “The potential is huge, but we will have challenges,” said Pichai. “In five to 10 years, quantum computing will break encryption as we know it.” After decades of incremental advances in quantum computing, a group of tech giants and start-ups are on the verge of commercialization. As more purely quantum firms become public companies, investors would do well to at least keep an eye on the burgeoning field, which analysts expect has the potential to disrupt the tech world and create billions of dollars in value in the process. Since its conceptual birth in the early 1980s, quantum computing has held promise for systems that could exponentially outperform today’s computers. Rather than relying on the zeros and ones of classical computers, quantum computers emerged from quantum physics, which is the study of the fundamental building blocks of matter and energy. The laws of quantum mechanics allow the smallest particles to exist in several states at the same time. So, unlike the binary bit of normal computers, the quantum bit or qubit can simultaneously be a combination of zero and one and any value in between. These strange properties explain the technology’s potentially explosive capabilities; Each additional qubit doubles the performance of a quantum computer. Quantum Leaps The race to create a working quantum computer capable of solving problems that today’s computers can’t solve intensified in 2019. At the time, researchers at Alphabet’s Google division claimed a breakthrough: They said their 54-qubit Machine called Sycamore can do a task in minutes that would take conventional supercomputers 10,000 years. Not to be outdone, IBM announced in May that it would ship a 4,000-qubit computer by 2025. While industry watchers say the threshold for widespread commercial use would be a 100,000-qubit machine, IBM claims its quantum computer will be able to address some of the more fundamental problems the technology aims to solve, including portfolio optimization for financial firms . Although the market for quantum computing hardware and services is still in its infancy, it will grow at a compound annual rate of 50% from $475 million last year to around $2.5 billion by 2025 and 2025, according to Cowen analysts $19 billion growing by 2030. Cowen’s Krish Sankar compared the emerging field of quantum companies to early-stage biotech companies, where it’s “hard to predict when the drug will arrive.” Many of the companies are employing different strategies to address the problem of scaling up in qubits. “No one knows what will work; maybe all of them do,” said Sankar. “Most of them have a schedule in the next three to five years to get enough qubits for commercialization,” he added. As next-generation computers are expected to be able to simulate chemical reactions at the molecular level, enabling leaps in materials science and drug manufacturing, pharmaceutical, chemical and automotive companies will be among the first industries to benefit will. But that computing power comes with risks, as Alphabet’s Pichai notes. Quantum computers are expected to be able to solve the mathematical problems underlying many of today’s encryption techniques, such as revealing the security of websites and emails. This could threaten global finance and technology companies and pose a risk to cryptocurrencies as hackers could potentially steal bitcoins, for example. This has spurred investment and greater awareness among business leaders. For example, JPMorgan Chase has built an in-house team of scientists to, among other things, advance the development of next-generation communications networks safe from the quantum threat. According to research firm Gartner, nearly 40% of large companies will launch their own quantum projects by 2025. Given the prohibitive cost and bulky size of quantum computing, most companies are expected to tap into the technology via the cloud, analysts say. Interest in the futuristic technology — which typically requires maintenance of large hardware rigs in super-cold temperatures — has exploded in recent years as venture capital investors pour money into the sector. Startups focused on quantum tech received $1.4 billion in funding last year, double what the industry received in 2020, according to McKinsey. Still, the burgeoning sector has been hammered into the tech routine this year. Several of the public quantum companies took advantage of last year’s window for smaller, unprofitable companies to go public via SPAC deals. But all of them are currently trading below their list prices and have fallen out of favor with investors who now prioritize earnings over growth. The influx of money and the growing adoption of the technology have sparked a backlash. It’s unclear whether a “large-scale, fault-tolerant” quantum machine will ever be built, Oxford University physicist Nikita Gourianov wrote in an August comment. According to Gourianov, quantum computers are an overhyped bubble with no practical applications. One of their challenges is that the computers are extremely sensitive to environmental disturbances, which falsify their information and make them very error-prone. A numbers game However, according to Konstantinos Karagiannis, quantum computing specialist at consultancy Protiviti, there are two reasons why quantum computing should overcome its technical challenges. Quantum computers will be able to compensate for bad qubits (caused by infinitesimal amounts of heat or electromagnetic fields) through a technique called “error correction,” he said. In addition, connecting smaller modules will make larger quantum computers, he added. “I’ve seen some amazing advances in qubit accuracy,” Karagiannis said in an interview. “We don’t need perfect qubits, we need them to be really good, and then we need enough of them to do what’s called error correction.” While there are more than 200 quantum-related companies today, only four of the so-called pure plays, according to Bernstein, will become reality publicly traded. They are called D-Wave Systems, Rigetti Computing, IonQ and Quantum Computing. Cowen recommends Rigetti Computing of Berkeley, California, which develops circuits for quantum computing and offers a cloud platform that allows engineers to design quantum algorithms. The 9-year-old company, founded by a former IBM physicist, is “well-positioned” to benefit from the adoption of quantum computing as a service, according to Cowen. Focused on enterprise software solutions, Quantum Computing has a “buy” rating from Ascendiant Capital Markets’ Edward Woo, who expects “strong growth” over the next year as the company ramps up marketing. “Being an early adopter of this fast-growing industry, we believe Quantum is well-positioned to capture and advance significant market share,” Woo wrote in a recent statement, outlining his price target for the Leesburg, Va. resident companies to $9.50. The stock is down 33% this year and last closed at $2.27 for a 319% gain if Woo hits his target. Other companies that will see revenue from quantum computing include Applied Materials and MKS Instruments, according to Cowen. Applied Materials, which supplies equipment to semiconductor and display manufacturers, will benefit from rising demand for superconducting chips, Cowen said. MKS, a supplier to semiconductor manufacturers and advanced electronics, can supply the industrial lasers needed in various quantum rigs. Still, even its proponents concede that given the speculative nature of the field and the unknowns surrounding commercialization, the adoption of quantum computing could be a bumpy road for investors. A more conservative way of operating in this sector might be to own established large tech companies. Alphabet and IBM are poised to become major players in quantum computing if their investments are any indication. Last year, Alphabet’s Google announced a multibillion-dollar plan to build a commercial quantum computer by 2029, powered by its new quantum campus in California. Meanwhile, IBM has made one of the largest commitments to quantum, with several hundred employees, more than 20 quantum computers and a cloud service with more than 360,000 users. Last year Microsoft launched its Azure Quantum cloud service, a full-stack offering that gives customers access to quantum hardware and software. The tech giant has eight quantum computing labs around the world and is working to develop its own quantum computer based on a potentially more stable form of technology. Quantum supremacy The efforts of large, financially strong companies and start-ups bode well for the industry. So-called quantum supremacy — the moment when quantum computers can perform computations far beyond the scope of traditional supercomputers — could arrive by the end of the decade, according to JPMorgan’s Marco Pistoia, a quantum expert who has spent most of his career at IBM . “Even now that quantum computers aren’t that powerful, we don’t have that much time left,” Pistoia said on a podcast. Businesses must prepare for that moment now or risk falling behind, he said. This progress encourages others. “We see those milestones happening, so I’m sure we’ll achieve them,” Karagiannis said. “The machines are going to be really, really good.”
Dangers and promises of quantum computing are approaching