Quantum Computing Stocks Soar on Google’s New Chip Announcement
The quantum computing sector is abuzz with excitement after Google unveiled Willow, a groundbreaking chip designed to vastly improve the accuracy and scalability of quantum computers. Shares of tech giant Alphabet,Google’s parent company, surged 4% on Wednesday, continuing the momentum from a nearly 6% gain in the previous session.
Willow, according to Google, has the potential to drastically reduce errors as the number of qubits, the fundamental building blocks of quantum computers, increases. This advancement marks a significant leap forward in the field, as reducing errors is crucial for harnessing the Bonita full potential of quantum computing.
Riding the Quantum Wave: A Boost for Smaller Players
Google’s breakthrough had a ripple effect throughout the industry, lifting other quantum computing stocks, including Rigetti Computing, a lesser-known contender in the field.
Rigetti shares surged to new highs on Wednesday, soaring 45% on Tuesday and remaining elevated throughout the week. The stock has witnessed an astounding surge of over 550% year to date.
The optimism in the quantum computing sector wasn’t confined to individual companies. The Defiance Quantum ETF, an exchange-traded fund tracking the performance of quantum computing businesses, also saw a 2% increase on Tuesday, fueled by the positive sentiment surrounding Google’s announcement.
Other notable performers in the ETF included MicroStrategy, up 538% this year, and D-Wave Quantum, experiencing a 355% surge.
Shares of Nvidia, Coherent, IonQ, and RadNet have also more than doubled in value.
Beyond Hype: The Path to Monetization
While the initial market reaction was enthusiastic, some experts advise caution. Paul Meeks, Chief Investment Officer at Harvest Portfolio Management, emphasizes the importance of a long-term perspective.
He believes that while quantum computing holds vast long-term potential,
real-world applications and monetization strategies are still several years away.
Meeks suggests that investors considering exposure to the quantum computing sector should focus on megacap technology companies with established businesses and core segments beyond quantum computing.
“For Alphabet, it’s fine because it’s a call option on an existing good business, but for these others, pure plays, if they get driven up too much more, they probably become shorts,” he said.
Echoes of Past Rallies
Meeks draws parallels between the current excitement around quantum computing and the surge in AI-related stocks seen in late 2022.
“The setup, he said, flashes similarities to late 2022, which sent up shares of players from Nvidia to C3.ai.
He cautions against getting caught up in the hype and stresses the need to identify companies with clear use cases that can be effectively monetized.
“I need to see use cases, and use cases that can be monetized,” he said.
“I like the technical progress, but I wouldn’t put too much of a valuation bump on any of these just based on that announcement.”
Despite the cautious outlook, Eric Jackson of EMJ Capital remains bullish on the sector. He considers quantum computing to be the “next big theme,” highlighting his position in Rigetti Computing and expressing confidence in the company’s future prospects.
While the road ahead for quantum computing may be long and winding, the recent developments signal a significant step forward for the technology. As researchers continue to push the boundaries and companies begin to explore tangible applications, the quantum computing landscape promises to be one of the most exciting and dynamic sectors to watch in the years to come.
