Here’s how hot quantum stocks have been lately, and what to know about them

Move over, Amnesty International.

Shares of quantum computing — the technology that sparks massive computing power — have soared in the past year, making even the rise of artificial intelligence appear muted. Shares of D-Wave Quantum (QBTS) and Rigetti Computing (RGTI) rose 2,700% and 3,100%, respectively, during that period. Quantum computing (QUBT) is up 1,100%. IonQ (IONQ), which is up 250%, is the laggard among the pack.

Only a few of Wall Street’s favorite AI stocks have posted similar gains in the past 12 months. Shares of software companies Palantir (PLTR) and Applovin (APP), which have been lauded for their AI-driven growth, have risen nearly 300% in the past year. Nvidia (NVDA), the poster child of the AI ​​boom, gained nearly 44%.

Rallyes typically slow with age, so it’s understandable that a newer topic has more momentum behind it — especially at a time when investors have been willing to bank on speculative concepts and companies. But compare quantum stocks over the past year to AI stocks in the year following the release of ChatGPT, and you’ll find that quantum is still significantly outperforming AI: Nvidia shares are up 206% in the 12 months from November 30, 2022, while server maker Super Micro Computer ( SMCI ) is up 212%.

Wall Street certainly didn’t immediately realize how important ChatGPT was for Nvidia, and the chipmaker’s stock gains accelerated in 2023. But even in the year-long period in which Nvidia rose the fastest — between March 2023 and March 2024 — its nearly 300% return still pales in comparison to most quantum stocks in the past 12 months.

What’s driving the quantum craze?

A series of technological breakthroughs and major technology investments have increased the visibility of quantum computing on Wall Street over the past year.

Last December, Google (GOOG) unveiled Willow, a quantum chip that it claims can solve a problem in 5 minutes that would take the world’s fastest supercomputer 10 septillion years to complete. (This is 714 trillion times the estimated age of the universe.) Microsoft (MSFT) debuted its quantum chip in February, and Nvidia last month unveiled hardware specifically designed to connect quantum computers and accelerated computing chips that power artificial intelligence.

As in the early days of the rise of artificial intelligence, quantitative investors are betting that the emerging technology will have profound impacts on the economy and business. Quantum computing is expected to drive advances in drug discovery, advanced manufacturing, cybersecurity, financial modeling, and logistics, to name a few of its potential commercial applications.

Due to the speculative nature of quantitative investments, stocks swing wildly at the slightest shift in sentiment. Rigetti shares fell 45% one day in January when Nvidia CEO Jensen Huang said he believed a “very useful” quantum computer was still about 20 years away.

Quantum stocks, despite their recent rally, are relatively small compared to AI stocks. The market caps of the four companies mentioned above range from $2.5 billion (D-Wave Quantum) to $18.5 billion (IonQ), valuations that are by no means small, but dwarfed by Nvidia’s $5 trillion market capitalization.

There’s another factor that has pushed stocks higher in recent months: the Trump administration’s pragmatic approach to public-private partnerships. The Wall Street Journal It was recently reported that the White House is in talks to invest in several quantum computing companies. The Trump administration, which has made similar deals with chipmaker Intel (INTC) and rare earth miners, denied the reports, but that didn’t stop quantum stocks from rising.

What is the path to marketing?

Hwang’s 20-year quantum timeline may be one of the most pessimistic, but the technology faces hurdles to commercialization. Quantum computers are too error-prone to achieve “quantum advantage” — the point at which a quantum computer can solve a real-world problem faster than a classical computer — according to a recent report from Bank of America.

Last month, IonQ announced that it had achieved precision — a measure of computational accuracy — of 99.99%, which is a record for quantum computers and essentially means the computer will make one error for every 10,000 calculations. But the binary computers we use today are much more accurate, making one error in every 10 quintillion calculations, according to Bank of America. To achieve “quantum advantage,” Bank of America estimates that quantum must reach 99.9999% accuracy.

Quantum computers may be difficult to integrate with existing digital infrastructure such as data centers and software, according to Bank of America.

However, consulting firm McKinsey estimates that the quantum computing market could reach $97 billion by 2035, and nearly $200 billion by 2040. And monetization by leading technology companies may not be too far away: Bank of America analysts said in a note last month that they expect quantum computing to have a material impact on computing leader IBM’s (IBM) results by 2030.