$850bn by 2040! Should I buy quantum computing stocks for my Stocks and Shares ISA?
My Stocks and Shares ISA holds many companies poised to benefit from powerful global trends unfolding both now and well into the future.
These include digital payments (Visa), online shopping (Shopify and MercadoLibre), artificial intelligence (AI) (Nvidia and Taiwan Semiconductor), cybersecurity (CrowdStrike), and international travel (Rolls-Royce and InterContinental Hotels).
Perhaps the next big one — which some think could be more impactful than the internet and smartphones — is quantum computing. These machines could turbocharge drug discovery, AI systems, and develop theoretically unbreakable quantum encryption.
Projections vary on how large this market might become. According to McKinsey, it could be $173bn by 2040. Boston Consulting Group goes higher, saying quantum computers will create up to $850bn of global economic value by then.
Either way, this market’s expected to be far larger than today. And while 2040 might sound miles off, it’s actually just 14.5 years away!
So should I buy quantum computing stocks in my ISA to ride this coming mega-trend? Let’s explore.
What is quantum computing?
IBM describes this technology as “an emergent field of cutting-edge computer science harnessing the unique qualities of quantum mechanics to solve problems beyond the ability of even the most powerful classical computers“.
Note the word “emergent“. In other words, no commercially useful quantum computers exist yet. They’re still prone to errors and much more research is needed before they’ll start changing the world.
The basic buildings blocks of these computers are called qubits (or quantum bits). Many experts reckon a really useful one will need at least 1m qubits. The most advanced quantum computers today have far less than that.
That said, rapid progress is being made. One Google executive working in this area reckons the industry could be “about five years” away from a game-changing breakthrough.
IonQ
Despite this, there’s a small handful of pureplay quantum computing stocks in the market today. These include IonQ (NYSE: IONQ), D-Wave Quantum, and Rigetti Computing.
| Company | Market Cap | One-year price return | 2024 revenue | Price-to-sales ratio |
|---|---|---|---|---|
| IonQ | $8.7bn | 294% | $43.1m | 200 |
| D-Wave Quantum | $3.6bn | 835% | $8.8m | 409 |
| Rigetti Computing | $3.5bn | 948% | $10.8m | 324 |
As we can see, IonQ’s the largest, with a market-cap of $8.7bn. The company develops both physical quantum processors and the software needed to operate them. Customers can rent access to its quantum systems via cloud platforms such as Amazon Web Services (AWS).
Last year, IonQ’s revenue jumped 95% to $43.1m, and it’s expected to increase another 97% this year. So this is a fast-growing company tapping into early demand for experimentation, research, and quantum infrastructure-building.
Naturally, profits aren’t expected for years, which adds a lot of risk. But the firm did have nearly $700m in cash at the end of March, which will last more than three years at the current cash burn rate ($32m loss in Q1).
My problem here is that the stock’s trading at around 200 times sales after rising 350% in eight months. That’s an extreme valuation for a company that might not end up being a winner in this space.
Meanwhile, it faces formidable competition from deep-pocketed tech giants such as IBM, Google/Alphabet, and perhaps one day Nvidia.
IonQ and the other quantum computing stocks listed above are too speculative for my liking. For investors wanting some exposure to quantum computing, I think established firms including Alphabet, Amazon and Nvidia are currently the best plays to consider.
The post $850bn by 2040! Should I buy quantum computing stocks for my Stocks and Shares ISA? appeared first on The Motley Fool UK.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Foolâs board of directors. Ben McPoland has positions in CrowdStrike, InterContinental Hotels Group Plc, MercadoLibre, Nvidia, Rolls-Royce Plc, Shopify, Taiwan Semiconductor Manufacturing, and Visa. The Motley Fool UK has recommended Alphabet, Amazon, CrowdStrike, InterContinental Hotels Group Plc, International Business Machines, MercadoLibre, Nvidia, Rolls-Royce Plc, Shopify, Taiwan Semiconductor Manufacturing, and Visa. 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.
