CBInsights defines quantum computing as the process of information that is represented by special quantum states. By tapping into quantum phenomena like “superposition” and “entanglement,” these machines handle information in a fundamentally different way to “classical” computers like smartphones, laptops, or even today’s most powerful supercomputers. Quantum computing has the power to solve critical computational problems across a wide array of services.
Quantum computing has become viable for the growth of a business and society as a whole. In an study by MarketWatch, The Global Quantum Computing Market was valued at $89 million in 2016 and is projected to reach $949 million by 2025, growing at a CAGR of 30% from 2017 to 2025. In a separate study by McKinsey, there will be an estimated 2,000 to 5,000 quantum computers worldwide by 2030. Automotive will be one of the primary sectors for quantum computing with a high impact noticeable by around 2025 (see 12 Best Autonomous Vehicle Stocks to Buy For 2021.).
Quantum computing isn't a theoretical subject anymore. "Today, real quantum processors are used by researchers from all over the world to test out algorithms for applications in a variety of fields. But it was only a few decades ago that quantum computing was a purely theoretical subject." IBM said about this. During the COVID-19 pandemic, pressures on finding a solution to seamless communication and data transfer has prompt the way for quantum computing. The industry had provided solutions where there are no identifiable trends and solved problems outside existing supercomputing capabilities.
Although most quantum computing companies are not pure-play, investing in these stocks will provide potential capital grains by buying and holding a stock while watching the industry grow. The long-term possibility of bringing such tech to the market will post a good return.
Today, some of the biggest tech giants are working on the technology to bring QC on areas such as logistics, military affairs, pharmaceuticals, aerospace, utilities, AI, and especially digital manufacturing. According to Nasdaq, the productivity gains by end-users of quantum computing, in the form of both cost savings and revenue opportunities, are expected to surpass $450 billion annually. Based on a report by BCG value in the industry will increase rapidly as the technology and its commercial viability mature
“It will be a slow build for the next few years: we anticipate value for end users in these sectors to reach a relatively modest $2 billion to $5 billion by 2024. But value will then increase rapidly as the technology and its commercial viability mature,”
The race for quantum dominance heats up. Recently, IBM (IBM) announced their plan to build a 1,000-qubit quantum computer by 2023. This will pave way for a revolution in computing. IBM's vice president of quantum research, Jay Gambetta, said in a release.
"We think of IBM Quantum Condor as an inflection point, a milestone that marks our ability to implement error correction and scale up our devices, while simultaneously complex enough to explore potential quantum advantages — problems that we can solve more efficiently on a quantum computer than on the world's best supercomputers,"
In order to identify the 11 best quantum computing stocks to buy now, we started out with Defiance Quantum ETF (QTUM)'s holdings and ranked them using our hedge fund sentiment scores. Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017 (see details here) Some of the portfolio holdings of our monthly newsletter have been shared publicly too. In October, we shared this real estate stock and since then, it’s been up more than 50 percent.
Based on our hedge fund sentiment data, we now present to you the 11 best quantum computing stocks to buy now based on the stock picks of 800+ hedge funds tracked by Insider Monkey:
No of HFs: 59
Total Value of HF Holdings: $2.49 Billion
We start the list of best quantum computing stocks with AMAT. The company is known for their engineering solutions used to produce virtually every new chip and advanced display in the world. Heading into the fourth quarter of 2020, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. By comparison, 55 hedge funds held shares or bullish call options in AMAT a year ago.
Among these funds, Generation Investment Management held the most valuable stake in Applied Materials, Inc. (NASDAQ:AMAT), which was worth $312.3 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $233.4 million worth of shares. AQR Capital Management, Arrowstreet Capital, and Matrix Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Applied Materials, Inc. (NASDAQ:AMAT), around 6.58% of its 13F portfolio.
D.A. Davidson recently upgraded Applied Materials to a buy, raising its price target to $130 citing recent strength in semiconductor capital equipment industry.
No of HFs: 66
Total Value of HF Holdings: $4.34 Billion
INTC ranks 10th in our list of the best quantum computing stocks to buy now. You probably know that Intel shares received a boost from Dan Loeb's activist campaign. "we suggest the Board retain a reputable investment advisor to evaluate strategic alternatives, including whether Intel should remain an integrated device manufacturer and the potential divestment of certain failed acquisitions," Loeb said in a letter. Insiders also think Intel shares are undervalued. An insider purchased 8,021 shares at around $44 in October 2020. The stock is up 25% since then. The stock was mentioned in as one of the 10 Best Dividend Paying Stocks To Buy Under $50 and 15 Best Blue Chip Stocks to Buy Now. INTC recently announced that their 7-nanometer chip manufacturing technique is on track to make chips sold in 2023. Pat Gelsinger, Intel’s incoming CEO said,
“I am pleased with the progress made on the health and recovery of the 7-nanometer program. I am confident that the majority of our 2023 products will be manufactured internally. At the same time, given the breadth of our portfolio, it’s likely that we will expand our use of external foundries for certain technologies and products.”
No of HFs: 67
Total Value of HF Holdings: $7.97 Billion
TSM ranks 9th in our list of the best quantum computing stocks to buy now. Taiwan Semiconductor Mfg. Company became the first Taiwanese company to list on the NYSE. In First Eagle Investment Management’s Q3 2020 investor letter they mentioned a few of their comments in the stock.
“Shares of Taiwan Semiconductor (TSMC) traded higher during the quarter on signs that its total addressable market was poised to expand. Intel announced that it was facing delays in the manufacture of its next-generation chips and may contract out the work to third parties, opening the door for a large-scale chip “foundry” like TSMC to pick up some of the business. Foundries make chips designed and named by other companies; TSMC already produces certain chips for Intel.”
No of HFs: 68
Total Value of HF Holdings: $1.63 Billion
NXPI is the 8th best quantum computing stock to buy now according to hedge funds. At the end of the third quarter, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 1% from the second quarter of 2020. On the other hand, there were a total of 62 hedge funds with a bullish position in NXPI a year ago. An insider purchased 1,500 shares at around $134 in October 2020. The stock is up 25% since then. NXPI was mentioned as one of the 14 Best Internet of Things (IoT) Stocks to Buy Now. NXPI is known for the production of semiconductors. They operate in three segments, standard products, high-performance mixed-signal and Corporate, and others. During the third quarter of 2020, the company reported total revenue of $2.27 billion.
Recently, the company announced a complete suite of new radar sensor chipset solutions that can surround vehicles in a 360-degree safety cocoon. Torsten Lehmann, EVP, and GM, Radio Frequency Processing of NXP said the radar sensor solutions can help users cover NCAP requirements.
“Radar has evolved from just detecting other cars’ velocity and distance to providing imaging radar’s high-resolution object and feature detection for precisely mapping the car’s surroundings. Our new radar sensor solutions can help customers cover NCAP requirements to make driving safe, and also address the frontier of ADAS sensing on the path towards fully autonomous vehicles.”
No of HFs: 71
Total Value of HF Holdings: $5.08 Billion
AMD ranks 7th in our list of the best quantum computing stocks to buy now according to hedge funds. At the end of the third quarter, a total of 71 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from one quarter earlier. In an article, Carillon Eagle Mid Cap Growth Fund mentioned that AMD outperformed due to healthy growth in the personal computer and data center server markets
“Advanced Micro Devices produces semiconductor products and devices. The stock outperformed due to healthy growth in the personal computer and data center server markets. The company also continues to gain share against its major competitor, which is having significant issues in its next generation products. Furthermore, investors have appreciated the margins and profitability the company has been posting in addition to the topline strength.”
No of HFs: 79
Total Value of HF Holdings: $4.57 Billion
Micron ranks 6th in our list of the best quantum computing stocks to buy now. At Q3’s end, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Being a producer of computer memory and computer data storage, Micron Technology Inc. (NASDAQ: MU) is dubbed to be one of the largest makers of DRAM and NAND memory chips globally and supplies memory chips to other businesses that need it for their products.
In an interview with CNBC, Mark Tepper of Strategic Wealth Partners said, “I’ll be holding Micron.”. He mentioned that there’s always a supply and demand narrative over this type of company. “Their product is the ‘input’ to technology and not technology itself.” Mark added that he rather own the ‘technology’ than having only the raw product.
Meanwhile, MKM Partners’ JC O’Hara said, Micron has plenty of room to run upwards. He emphasized that the recent breakout of Micron after a long period of consolidation is a ‘very powerful bull run’. “Technically, we see the stock to push higher to $85 in the near term and that gives you another 10% from the current levels.”. He concluded that investors must stay in touch with Micron’s management when it reports earnings on Jan. 7, because this could either be a potential catalyst or risk factor for the stock.
Bonsai Partners also mentioned MU in their Q3 2020 investor letter.
If there’s one investment mistake I’ve made multiple times in my career it’s accepting lower quality businesses available at attractive prices. I hope I’m not repeating this mistake again with Micron.
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Disclosure: None. 11 Best Quantum Computing Stocks To Buy Now is originally published at Insider Monkey.
