Quantum computing stocks have emerged as one of 2024's hottest investment themes, with the Defiance Quantum ETF(NASDAQ: QTUM) soaring 49.4% year to date, nearly doubling the S&P 500's robust 24.3% gain. While widespread commercial quantum computers might take years to develop, major technological breakthroughs have sparked an early rush into what many see as the next computing revolution.
The excitement isn't just speculative hype. Quantum computing achieved two groundbreaking milestones in 2024, suggesting we're approaching a technological tipping point.
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Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) made history with its Willow quantum computing system, which demonstrated the ability to reduce errors as the number of qubits increases exponentially. This breakthrough solves a challenge that has stumped researchers for nearly 30 years. Even more impressively, Willow completed a benchmark computation in under five minutes that would require today's fastest supercomputers 10 septillion years to solve -- a timespan far greater than the universe's age.
Meanwhile, quantum computing start-up Infleqtion, working with Nvidia(NASDAQ: NVDA), achieved another first by demonstrating a practical materials science application using logical qubits. This breakthrough, which delivered a 6x boost in computational accuracy, hints at quantum computing's potential to revolutionize everything from battery technology to superconductors.
While quantum computing remains in its infancy, these early breakthroughs, spurred by tech giants Alphabet and Nvidia, suggest we might be at the dawn of a computing revolution. Two companies are pioneering this transformative technology that could supercharge your portfolio in 2025 and beyond.
Industry leadership through quantum execution
Trapped-ion quantum computing leader IonQ(NYSE: IONQ) has emerged as one of 2024's standout quantum computing stocks. The company's novel approach uses ionized atoms as the heart of its quantum systems, enabling longer and more sophisticated calculations with fewer errors than competing approaches. IonQ's platform integrates with all major cloud providers and supports multiple programming languages, making quantum computing highly accessible to developers and researchers.
The company's competitive advantages come from deep academic roots in ion trap technology spanning over 25 years of research and proven commercial traction through government and enterprise partnerships. IonQ has also expanded into quantum networking, working at the intersection of quantum computing and the future quantum internet.
However, despite IonQ's impressive 258.5% stock gain in 2024, the company remains unprofitable and faces significant technological and commercialization risks. The quantum computing industry is still in its early stages, with uncertain timelines for achieving practical advantages over classical computers. Competition from tech giants and other quantum start-ups and the potential for technological obsolescence represent key risks to IonQ's market position.
While IonQ's valuation may seem steep after its stellar 2024 run, with shares trading at nearly 250 times trailing sales, the company's growing commercial momentum, expanding quantum networking business, and strong balance sheet of $382.8 million at the end of the most recent quarter put it in pole position to capture a significant share of what could become a multitrillion-dollar quantum computing market. For investors with a high risk tolerance and a long-term horizon, IonQ offers pure-play exposure to one of technology's most promising frontiers.
Industry leadership through superconducting innovation
Quantum computing pioneer Rigetti Computing(NASDAQ: RGTI) takes a fundamentally different approach to quantum computing than IonQ, using superconducting circuits instead of trapped ions. The company's vertically integrated strategy includes Fab-1, the industry's first dedicated quantum foundry, giving Rigetti control over the entire quantum chip development process. This in-house manufacturing capability allows for rapid innovation cycles and helps protect against supply chain risks.
The company's latest Ankaa quantum processor architecture has achieved 98% two-qubit gate fidelity, marking significant progress in quantum performance. Rigetti's strategy focuses heavily on scalability through a modular chip design that allows larger quantum systems to be built from smaller, identical components. The company has also built strong partnerships across government, research, and commercial sectors.
However, like other quantum companies, Rigetti faces major technological hurdles and remains unprofitable. The stock's 851.2% surge in 2024 and valuation at 130 times sales indicate investors are pricing in significant future growth potential. Still, with its integrated manufacturing approach, improving quantum performance metrics, and clear technology roadmap through 2025, Rigetti offers an intriguing pure-play option for investors seeking exposure to superconducting quantum computing technology.
The quantum investing strategy: Pure plays versus tech giants
While tech giants like Alphabet and Nvidia have made significant strides in quantum computing, their massive market capitalizations mean quantum breakthroughs will likely have minimal impact on their stock prices. Pure-play quantum companies like IonQ and Rigetti offer more direct exposure to the technology's potential, though with considerably higher risk. Each represents a different technological approach -- trapped ions versus superconducting circuits -- and both could emerge as winners in what may become a massive new computing market.
Given quantum computing's early stage and technical complexity, however, many investors may prefer a more diversified approach. The Defiance Quantum ETF offers exactly that, balancing pure-play quantum stocks with established tech leaders advancing the technology. With quantum computing potentially approaching an inflection point, investors now have multiple ways to position themselves for what could become one of the most transformative technologies of our time.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. George Budwell has positions in IonQ and Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.
