To The Moon

The recent stellar performance of some quantum computing stocks is indeed a sign of growing excitement and investment in the field, but it is important to understand that the "quantum computing era" in terms of widespread commercial adoption is still some years away.

Nvidia (NVDA) plays a role in quantum computing as a facilitator and enabler, rather than a builder of quantum computers themselves. They leverage their expertise in AI and accelerated computing to help advance the field of quantum computing by providing tools and resources for researchers and developers.

Here is a breakdown of what is happening and what to expect

Current State of Quantum Computing

Significant Progress: There have been substantial breakthroughs in quantum computing hardware and software. Companies like $Alphabet(GOOGL)$ , $IBM(IBM)$ , $Microsoft(MSFT)$ , $IONQ Inc.(IONQ)$ , and $D-Wave Quantum Inc.(QBTS)$ are making strides in developing more stable qubits and increasing qubit counts.

Early-Stage Commercialization: While fully fault-tolerant, large-scale quantum computers are still in the future, early-stage quantum solutions are already being explored for specific problems. These often involve "hybrid quantum-classical systems" where quantum computers handle parts of a problem that are computationally intractable for classical computers, and classical computers handle the rest.

Focus on Specific Use Cases:

This is how quantum computing used cases looks like four years ago, we have made significant progress in terms of seeing the emergence in key areas and looking at their growth.

The science categories that will be directly impacted by quantum include physics, chemistry, mathematics, and biology. Applications for industry will impact industry verticals such as healthcare, finance, commerce, communications, security, cybersecurity & cryptography, energy, space exploration, and numerous other disciplines. Basically, any industry where data is an ingredient.

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Initial applications are emerging in areas like

Drug Discovery and Materials Science: Simulating molecular structures and reactions to design new drugs and materials.

Optimization: Solving complex optimization problems in logistics, finance (e.g., portfolio optimization, risk management), and manufacturing.

Cybersecurity: Developing quantum-safe encryption methods, as quantum computers could eventually break current encryption standards.

Artificial Intelligence and Machine Learning: Accelerating machine learning model training and processing vast datasets more efficiently.

Increasing Investment: Both public and private funding are pouring into quantum research and development, driven by governments recognizing its strategic importance and venture capital flowing into quantum startups.

Volatility in "Pure-Play" Stocks: Smaller companies focused solely on quantum computing tend to be more speculative due to the early stage of the technology. Larger, more established tech companies are also heavily investing in quantum research.

When Will the "Quantum Computing Era" Begin?

Not Yet Mainstream: Experts generally agree that large-scale, practical quantum computers are still 10-20 years away from becoming mainstream and widely adopted across various industries.

2025 as a "Quantum-Ready" Year: While not the year of widespread adoption, 2025 is seen as a pivotal year for laying the foundation for future quantum growth. Companies are encouraged to start exploring, identifying, and building application roadmaps to become "quantum-ready." The UN even declared 2025 the International Year of Quantum Science and Technology (IYQ).

Microsoft's Quantum Ready Initiative

Microsoft's Quantum Ready Initiative launched just a few weeks after the company outlined other quantum computing advances. Microsoft is also building its own quantum computer and partnering to offer services via Azure.

The Quantum Ready Initiative includes industry-specific skilling modules, expert-guided workshops and roadmaps for integrating quantum computing and classical systems. Microsoft has a small services unit, but is aiming to build a quantum computing ecosystem that would include large systems integrators in the future.

This is a very good step forward to getting ready, and we shall monitor the development, maybe we could see commercial adoption happening sooner than we think.

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Milestones and Breakthroughs: The coming years are expected to see significant milestones in hardware, algorithms, and applications, with a focus shifting towards stability and error correction rather than just qubit count. McKinsey estimates that by 2030, there could be 5,000 operational quantum computers, though the truly complex problem-solving capabilities might not be available until 2035 or later.

Impact on the Technology Sector

Complementary, Not Replacement: Quantum computing is expected to complement the existing technology sector rather than replace classical computing. It will excel at solving problems that are intractable for even the most powerful supercomputers, opening up new possibilities.

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Enhanced Capabilities: Quantum computing will significantly enhance existing technologies and drive innovation in various tech sub-sectors:

AI and Machine Learning: Faster training, more efficient models, and breakthroughs in complex simulations and predictive models.

Cybersecurity: Development of quantum-safe encryption to protect data from future quantum attacks.

Software Development: New algorithms and quantum-inspired software will be developed for enterprise applications, enabling faster data analysis and improved supply chain management.

Cloud Services: Quantum computing will likely be offered as a cloud service, making it accessible to businesses without requiring them to build their own infrastructure.

New Opportunities and Challenges: The advent of quantum computing will create new business opportunities and demand for a skilled workforce. However, it also presents challenges like hardware limitations (e.g., extreme cooling requirements), high development costs, and the need for robust error correction.

Plan For Long Term Based On Your Investment Strategy Time Horizon

Investing in a nascent, high-potential technology like quantum computing before widespread commercial adoption requires a long-term, patient, and risk-aware approach.

Here is how we as investors might plan for such an investment time horizon:

1. Acknowledge the High Risk and Long Time Horizon:

Speculative Nature: Quantum computing is still largely in the research and development phase. Many companies are not yet profitable, and their success is highly uncertain. There's a significant risk of capital loss.

Long Runway to Commercialization: While breakthroughs are happening, widespread commercial applications that generate substantial revenue are still years, if not a decade or more, away. Be prepared to hold your investments for a very long time.

Technological Uncertainty: The "winning" quantum computing approach (superconducting, trapped-ion, photonic, topological, etc.) is not yet clear. Different companies are pursuing different paths, and some may fail.

2. Diversification is Key:

Within Quantum Computing: Don't put all your eggs in one quantum basket. If you invest directly in individual companies, consider a mix of those pursuing different hardware approaches and those focused on software/algorithms, or specific applications.

Across Broader Technology: Given the high risk, quantum computing should be a relatively small portion of a well-diversified portfolio. Complement it with investments in established tech giants, other high-growth sectors (AI, cybersecurity, biotech), and traditional, stable assets.

Geographic Diversification: Quantum computing research and development are global. Consider companies from different regions (e.g., US, Europe, Asia).

3. Investment Avenues:

Established Tech Giants:

Pros: These companies (e.g., Google/Alphabet, IBM, Microsoft, Amazon, Intel, Nvidia) have deep pockets, diverse revenue streams, and long-term R&D commitments. Quantum computing is often a side project for them, so any setbacks in quantum won't devastate their overall business. Nvidia, in particular, is a "picks and shovels" play, as its GPUs and software are crucial for quantum system design and testing, regardless of the winning hardware approach.

Cons: Quantum computing's impact on their overall revenue and stock price might be diluted compared to a pure-play.

Pure-Play Quantum Computing Companies:

Examples: IonQ (IONQ), Rigetti Computing (RGTI), D-Wave Quantum (QBTS), Quantinuum (private, but a major player spun out of Honeywell), PsiQuantum (private).

Pros: Direct exposure to the quantum computing theme, potentially higher upside if they succeed. Cons: Very high risk, highly volatile, may not be profitable for many years, vulnerable to technological shifts or larger competitors. Many are early-stage and may require venture capital or private equity access (if not publicly traded).

Exchange-Traded Funds (ETFs):

Example: Defiance Quantum ETF (QTUM) is one of the few focused ETFs.

Pros: Provides instant diversification across a basket of companies involved in quantum computing and related fields (like AI). Reduces company-specific risk.

Cons: May include companies with only tangential exposure to quantum computing. Management fees.

Venture Capital/Private Equity (for accredited investors):

Pros: Access to early-stage, potentially high-growth startups before they go public.

Cons: Very high risk, illiquidity (money is locked up for years), high minimum investment requirements, not suitable for most retail investors.

4. Due Diligence and Research:

Understand the Technology (at a high level): Familiarize yourself with the different approaches to quantum computing (superconducting, trapped-ion, photonic, etc.) and their respective challenges and advantages.

Company Specifics:

R&D Investment: Are they investing heavily in research and development?

Strategic Partnerships: Collaborations with governments, universities, or major tech firms can validate their technology and provide funding.

Team and Expertise: Look for strong scientific and engineering teams with deep expertise in quantum physics and computer science.

Roadmap and Milestones: Do they have a clear roadmap for increasing qubit count, improving fidelity, and developing applications?

Financial Health: For public companies, assess their cash burn rate and runway. For private companies, look at their funding rounds and investors.

Intellectual Property: Patents and proprietary technology can be a significant competitive advantage.

Monitor Industry Trends: Stay updated on breakthroughs, challenges, and partnerships in the quantum computing space. Follow reputable quantum computing news outlets and research reports.

5. Investment Strategy:

Dollar-Cost Averaging: Instead of investing a lump sum, consider investing a fixed amount regularly (e.g., monthly or quarterly). This helps average out your purchase price and reduces the risk of buying at a peak.

Allocate "Risk Capital": Only invest money you can afford to lose. This is not for your retirement savings or emergency fund.

Long-Term Mindset: Be prepared for significant volatility and periods of underperformance. The returns, if they come, will likely be back-loaded. Avoid checking prices daily and focus on the long-term vision.

Patience and Re-evaluation: The quantum computing landscape will evolve. Periodically re-evaluate your investments based on new technological developments, company performance, and market shifts.

Summary

While the stock market's excitement is indicative of the immense potential, the "quantum computing era" is still in its nascent stages. We are witnessing the groundwork being laid, with significant research, development, and strategic investments paving the way for a future where quantum computing will indeed complement and revolutionize various aspects of the technology sector.

By combining a diversified approach with thorough research and a long-term mindset, investors can position themselves to potentially benefit from the eventual rise of the quantum computing era, while managing the inherent risks of a pre-commercial technology.

Appreciate if you could share your thoughts in the comment section whether you think this is a good time to plan for a long term strategy for quantum computing stocks as well as some big tech involved in quantum.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.