To the uninitiated, quantum computing aims to utilize the law of quantum mechanics to increase computer calculation speeds by a factor of millions or even billions. However, the technology in its current form is not yet commercially viable, though remember, people said the same thing about AI a few years ago.
The opportunity lies here: companies are joining the quantum race, and many will eventually strike gold.
So, let’s look at three quantum computing-related stocks that can get you front-row seats to the latest technological revolution €”and the returns that come with it. To get my list, I used the following criteria to screen for companies operating in the quantum computing market:
- Positive YOY growth in full-year operating cash flow,
- A high percentage of revenue is spent on R&D.
I sorted the list based on the R&D expense-to-revenue ratio from highest to lowest to find companies willing to bet the farm and win the race.
Amazon.com (AMZN)
By now, everyone knows the tech giant Amazon.com (NASDAQ:AMZN). However, many may not be aware of its continuous success in breaking through the constraints of being just another online store.
The company has taken different paths in building its tech empire. Amazon Web Services, its metered, pay-as-you-go API, and on-demand cloud computing have seen some success. They also offer Braket Direct, a platform that allows researchers and software developers to reserve and utilize quantum computing technologies.
Amazon also announced a quantum computing chip late last year that can reduce potential errors in computational processes by a factor of 100 (or 99% in layman’s terms). This is an incredibly important stride in quantum computing, as the increased computation speeds can result in increased errors.
Amazon’s R&D spending, tagged as “Technology and infrastructure” in its financials, seems to be bearing fruit. It reached $85.62 billion in FY’23, representing 14.89% of its total revenue. In addition, the company’s operating cash flow grew from $46.75 billion to $84.95 billion €”more than enough to spend on its quantum computing efforts. This makes Amazon one of the most attractive quantum stocks to buy right now.
Alphabet (GOOGL)
Alphabet (NASDAQ:GOOGL), is one of the biggest tech giants today and among several that stand at the forefront of modern technology.
The company is no stranger to innovation. Alphabet recently entered the AI arena with Gemini, a generative AI based on the multimodal large language models of the same name. While Gemini is still catching up to ChatGPT, the company’s efforts in quantum computing are a whole other story waiting to be told.
Sycamore, a quantum processor developed by Google’s Artificial Intelligence division, claims to have reached “quantum supremacy” by completing a task in 200 seconds that would take 10,000 years on a classical supercomputer. The company reached a significant milestone in 2023 after reducing logical qubit error rates to 10-2.
Alphabet also launched XPRIZE, a global competition to develop quantum computing algorithms that can demonstrate problem-solving capabilities for real-world applications. Coupled with its long-term goal of building a one million-qubit supercomputer that could hasten the race towards quantum computing, real-life application may be just around the corner. Investors looking into quantum stocks to buy can’t go wrong with GOOGL.
In 2023, Alphabet spent $45.43 billion on research and development, or 14.77% of its total revenue. During the same period, its operating cash flow grew from $91.49 billion to $101.75 billion.
International Business Machines Corp (IBM)
Anyone working in a corporate setting may have encountered International Business Machines Corp (NYSE:IBM) at least once daily. The company is famous for its hardware and software products in many corporate offices and businesses. However, there is more to what they do.
IBM is a strong proponent of the development of quantum computing. In 2023, the company published a paper claiming it had developed a quantum error-correcting code 10 times more efficient than previously established methods. It also laid out a roadmap for quantum computing, showcasing its commitment to developing the technology.
The company also has a long-standing partnership with Rensselaer Polytechnic Institute to accelerate quantum computing research, workforce development, and education in New York. This partnership unveiled the world’s first-ever IBM quantum computer in the university’s Voorhees Computing Center Chapel. It partnered with the University of Melbourne and released the Qiskit quantum computing software stack.
In 2023, the company allocated around 11.31% of its revenue to research & development. Meanwhile, IBM’s cash flow increased from $10.43 billion to $19.93 billion.
On the date of publication, Rick Orford held long positions in AMZN and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.