Quantum computing is quickly gaining traction as the next major opportunity in the field of artificial intelligence.
By now, you’re probably well aware that AI is the driving force behind the rapid advancements in the technology sector. Within this space, semiconductor stocks have emerged as key winners, which is understandable given their vital role in powering a vast array of generative AI applications.
Recently, however, quantum computing has burst onto the scene as the latest buzzword in the AI world. Let’s delve into how stocks in this area have been performing recently, and later, I’ll highlight my top choice for a company making strides in this fascinating technology.
Are Quantum Computing Stocks the New Trendsetters in AI?
Quantum computing is opening an exciting chapter in the AI storyline. Investors are keenly searching for ways to capitalize on this burgeoning field. Take a look at the trends represented in the chart below:
RGTI data by YCharts
As we approached the end of 2024, companies like IonQ, D-Wave Quantum, Quantum Computing, and Rigetti Computing saw their stock prices skyrocket. Interestingly, these were penny stocks at the year’s start but quickly surged into billion-dollar valuations.
While such rapid growth might suggest these stocks are the "next big players" in AI, I urge caution against jumping on the bandwagon. Each of these firms is still in the developmental stage. They haven’t generated significant revenue and are continuously burning through cash. Essentially, the dramatic gains you see here are more characteristic of meme stocks than sound investment opportunities.
Although their current prices might appear attractive, their valuation multiples tell a different story—they’re not deserving of high price points. Fortunately, there are safer ways to explore quantum computing investments.
Image source: Getty Images.
My Top Choice for Investors Interested in Quantum Computing
There’s an age-old business adage that suggests the people who prospered most during the Gold Rush were those selling picks and shovels, rather than the miners searching for gold. This principle is applicable when seeking investments in emerging trends—the companies providing the necessary tools often stand to benefit the most.
In the case of quantum computing, Nvidia (NVDA) seems poised as the top opportunity.
During a recent discussion at the CES trade show in Las Vegas, Jensen Huang, Nvidia’s CEO, mentioned that it might take about 20 years before quantum computing scales significantly. There are pros and cons to this perspective.
For companies like IonQ, Rigetti Computing, D-Wave, and Quantum Computing, this suggests that substantial growth is still far on the horizon, requiring more R&D investment and continued cash outflow. While this scenario isn’t ideal for those firms, it presents a golden opportunity for Nvidia.
Quantum computing development demands significant investments in AI infrastructure, including GPUs, data centers, and software—all areas where Nvidia excels. This positions Nvidia as a crucial player in the quantum computing landscape.
Nvidia effectively serves as the "pick and shovel" supplier for the quantum computing journey. It’s interesting to note that Nvidia doesn’t need to be biased toward which specific companies succeed in quantum mechanics; its hardware and software will be essential regardless.
Given that quantum computing may take decades before reaching full maturity, Nvidia appears to have ample potential upside as more companies explore this AI frontier. While several factors make Nvidia a strong investment in 2025 and beyond, quantum computing represents an additional, promising driver that’s yet to be fully factored into its long-term potential. For growth-focused investors or those seeking significant involvement in AI applications, Nvidia presents an attractive long-term investment opportunity.
