Quantum computing emerging as a technology -- and investment topic
I'm a fan of the Marvel movies. Not just for the action and the effects, but perhaps even more so for the clever dialogue between characters. I find the writers and actors witty and brilliant.
In one of the Antman movies, the hero Scott Lang is being lectured on how he became the Antman. After the confusing diatribe from the physicists who created his Antman suit, he frustratingly asks "Do you guys just put the word 'quantum' in front of everything?" Well, for the past couple months, stock investors have been doing just that.
As seemingly quickly as the investment excitement surrounding Artificial Intelligence (AI) technology came into the financial market landscape, the hype around quantum computing has come on even faster. While AI may be the secret technology sauce of the current stock market rally, those focused on quantum computing believe this technology may soon take up the leadership mantle. While I am certainly not convinced, I don't think this topic is going away, so I thought we might cover some basics.
Like the Antman movie dialogue indicates, the subject of quantum computing is confusing. The terms used to discuss it are technical and most of the talk quickly breaks down into the jargon of a master-level physics textbook. I will do my best to avoid this technical jargon here, so I may also be off on some of my accuracy for our true physics-reader audience. Feel free to educate me; the rest of you stay with me.
The word quantum in its simplest form is used to describe processes or interactions occurring on a very small scale. Not small like microscopic, but rather small like subatomic. So small the processes are considered almost fundamental, in that they are the most basic interactions between energy and matter. Processes at this fundamental level occur in different contexts of time and reality. Despite attempts to build technology to harness these processes, they are not yet completely understood by physics.
Because quantum processes occur in different contexts of time, the opportunity to harness them with technology has become the focus of researchers. Developers of quantum computers promote the technology as a way to solve extremely complex mathematical equations and challenges in fractions of the time it would take for classical computing models (including AI). This speed would enable quantum computers to increase the computational potential of the planet by an incomprehensible magnitude.
This type of computing power has the capacity to be used to solve many complex problems. One positive example coming to mind is the ability to accurately model long-term global climate trends, a feat not yet possible with current technology. There are negative examples as well, as it is believed a true quantum computer could break any current computer security encryption within milliseconds. The financial and national security ramifications are terrifying.
Quantum technology is still primarily in the theoretical stage. I am only aware of two companies claiming to have built a machine based on quantum technology: Google and IBM. The basic form of quantum information interaction, called the qubit, is unstable and requires incredible amounts of energy to isolate and contain. Any interference present in this process tends to break down the qubit into a state of incoherence. It's mind-boggling stuff.
Some of the immense technological challenges, however, have not deterred a host of companies from pursuing development and commercialization of quantum technology. In November and December of 2024 this niche of the stock market ignited, and many quantum stocks rallied, drawing attention to this subsector.
Unlike the development of AI, which has been heavily dominated by giant mega-cap technology companies, quantum computing opportunities look to be more broadly spread among mid-sized companies and even start-ups. While the debate is raging about how soon quantum technology may provide commercially viable applications, with claims ranging from later this year to 15 to 20 years, the topic of investment possibilities in quantum computing is likely here to stay. While investors may not be early at this point, this topic and the companies developing this technology are certainly worth further exploration and research.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
