Why quantum stocks in an ISA could be a great long-term buy for investors
A Stocks and Shares ISA can be a handy tool for investors. Stocks held in it aren’t subject to capital gains tax. Therefore, if you buy a stock and it appreciates in value over the coming years, when you sell it you get to keep the full proceeds. As a result, identifying areas that could have high long-term growth rates is attractive. Here’s one sector I’ve spotted.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
What the fuss is about
A lot of interest is building regarding quantum computing right now. Traditional computers process information in bits (1s and 0s). Quantum computers, on the other hand, use qubits (quantum bits), which are basically more advanced. That means for certain kinds of problems, it could outperform even the worldâs fastest supercomputers by a country mile.
As a result, there are many implications for how this could eventually be used in the real world. This ranges from drug discovery and materials science, right through to AI and machine learning. At the moment, most applications are early-stage. But the key point is it could be transformative. This is why companies, governments, and investors are getting increasingly excited about it.
For investors, buying quantum-related stocks right now could represent a long-term buying opportunity in an ISA. With patience and a vision for years to come, if it really takes off, then the share price returns could be very high. Obviously, the risk is that excitement is misplaced or progress is slower than expected, which could stunt returns.
One to note
A popular stock in this space is Rigetti Computing (NASDAQ:RGTI). The US stock is up 2,880% in the past year! It builds hardware and software to enable quantum computing systems.
Its business model includes hardware sales (on-premises quantum systems), cloud subscriptions and research. I like this because it’s quite diversified in different elements that go into the quantum universe. Therefore, as the sector becomes more developed, it should have enough fingers in the pie to identify the key growth area.
The firm is focusing on the transition from research to revenue-generating assets. As this continues, I think more traditional investors may take notice.
Obviously, the stock has already soared this year, but with a market cap of $11bn it still has plenty of scope to grow. In terms of risks, revenue remains extremely small relative to the ambitious growth plans. It’s also still loss-making. Some are saying the stock is in a bubble, which could pop at any time.
Yet with any technology that’s in a relatively early stage, related stocks will be seen as high-risk. Rigetti is undeniably a risky stock, but with that comes the potential for high returns in years to come. Therefore, investors with the needed risk tolerance might want to consider it for their ISA portfolios.
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More reading
- Up 5,000% in a year, is Nasdaq stock Rigetti (RGTI) a ticket to wealth?
- UK investors are snapping up this ex-penny share thatâs up 6,410%!
- UK investors are piling into Rigetti stock. Should I follow the crowd and buy too?
Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
