Many quantum computing stocks exploded in value last year as investors hoped to get ahead of the crowd in what could be a transformational wave of new technology. Excitement grew in December after Google parent Alphabet posted about the impressive performance of its newest quantum chip, Willow. But Nvidia CEO Jensen Huang threw cold water on the party in early January following a discussion with analysts at the CES conference in Las Vegas. During the talk, Huang claimed that it likely would be at least 15 years before quantum computers were very useful.
Yet it's not too early to look into this burgeoning technology sector. In fact, Huang himself will be hosting Nvidia's first-ever Quantum Day at GTC (the GPU Technology Conference) 2025 on March 20. The company says the event is for "leaders and experts seeking to chart a course into the future of quantum computing."
IonQ(NYSE: IONQ) and Arqit Quantum(NASDAQ: ARQQ) are two quantum computing names investors might want to get familiar with as the industry begins to make inroads in 2025.
What's a qubit, anyway?
Qubits, or quantum bits, make it possible to investigate multiple problems at once. That's because they use quantum mechanics to achieve combinations of information that ordinary bits can't represent. That ability gives it superior computing power and can be groundbreaking for complex math problems and equations.
Quantum computing use cases include drug discovery, aerospace, encryption, material science, and genomics. Qubits can be made in several different ways. IonQ's quantum cores use atomic ions to create its power. It currently offers quantum computers with up to 36 qubits. The company expects to offer a new commercial computer targeting 64 useful qubits by the end of 2025.
Quantum computing is a marathon, not a sprint
Based in College Park, Maryland, IonQ has partnered with the University of Maryland to develop powerful quantum computers and networks to build an "ultra-secure Quantum Internet." It also recently announced a new deal worth about $21 million with the United States Air Force Research Lab (AFRL) for the installation of quantum network infrastructure to help connect ground stations to drones.
IonQ expects to generate about $40 million in revenue for all of 2024. But its market cap was already recently at $8.5 billion. For industry perspective consider that Boston Consulting Group (BCG) recently predicted that it could be until 2040 before there is a sustainable market for quantum hardware and software providers in the range of $90 billion to $170 billion.
Security is more important than ever
London-based Arqit Quantum is focused on a different side of the business. It supplies an encryption software platform that helps secure the data and communication links of cloud-based or networked devices even from the increasingly powerful quantum computers.
Arqit's system secures communication between devices by creating secret keys used to encrypt (scramble) messages, ensuring that only the right devices can read them. The keys can also be used only once, making them extra secure. It operates on a "zero-trust" model, meaning no device automatically trusts another -- it has to prove itself. Revenue has decreased in recent years as the company transitions to operational subscription licenses, resulting in lower upfront revenue.
Investors get too excited, too fast
Arqit only reported $293,000 in total revenue for its 2024 fiscal year ended Sept. 30, 2024. It also appointed a new CEO in September as it enters its next phase of revenue and operational growth.
The stock more than doubled over the last year amid the momentum trading of quantum stocks and as it announced new business opportunities. Arqit has a new multiyear enterprise license contract with a Middle East government that it expects will result in over $1 million in annual recurring revenue in total.
While revenue should ramp up in 2025 and beyond, some of that potential is built into its $330 million market cap valuation already. Its position in quantum-safe encryption could be an important niche when quantum computing becomes more mainstream. But that is still a long way away.
Investors got ahead of themselves fearing they would miss out on the next big tech wave. The momentum was boosted by large tech companies beginning to discuss quantum computing. In a recent blog post, Microsoft said 2025 was the year to become "quantum-ready" as quantum research is accelerating.
But even Google's state-of-the-art Willow chip only has 105 qubits. For some practical applications, it is estimated to take more than a million qubits, and even up to 20 million.
No one really knows how long it will be before quantum computers will have the power needed to successfully solve problems that make a meaningful impact in science or for business. Investments today could effectively be dead money for many years. It might make more sense to gradually build a position in these stocks. But IonQ and Arqit are two that are worth watching to potentially pay off down the road.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Howard Smith has positions in Alphabet, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
