Ride the Quantum Computing Wave to Riches With These 3 Promising Stock Picks

Stocks to buy

Quantum computers were first proposed in the 1980s by Richard Feynman, and the field has rapidly grown since then. Quantum computers can be programmed to achieve applications that modern computers cannot conceivably do. The most famous application is Shor’s Algorithm, which would allow many modern encryption paradigms to be broken. And many other achievements could be realized to provide benefits no classical computer can do. This has led to the rise of promising quantum computing stocks to buy.

Still, quantum computing remains a niche industry, which makes this a perfect time to invest. Poised for growth, small investments today could lead to big gains tomorrow. If you want to ride the quantum wave with stocks, there is no better industry to invest in than quantum computing.

As a niche industry though, there is still little standardization. Just as a modern computer is made with bits, a quantum computer is made with qubits. But there is no consensus on how to best make a qubit or how to wire them together. Still, this creates opportunities for a smart investor, who can understand the technology and find which systems are most likely to win out. Investing in the system which becomes standard for future quantum computers could be the best investment you could ever make.

So while the industry is still niche and many of the companies are still small, there are still many promising quantum computing stocks to buy. So here are 3 of the most promising quantum computing stocks to invest in.

D-wave Systems (QBTS)

A concept image showing a quantum computer with a matrix background; quantum computing. Quantum Computing

Source: Shutterstock

D-Wave Systems (NYSE:QBTS) is one of the smallest and most volatile of the quantum players. But that could make them one of the best choices to ride the quantum computing wave with stocks. After receiving a notice of noncompliance with the NYSE in March of this year, they recently regained compliance thanks to their surging stock price. They are also moving their headquarters from Canada to America, which could make them more attractive to institutional American investors.

D-Wave is most exciting for its work on quantum annealing. Quantum annealing should allow quantum computers to solve optimization problems that are intractable on classical computers. It is well known that many optimization problems are classically unsolvable. The traveling salesman problem is one such example, it involves finding the shortest possible journey for a traveling salesman to visit every city in a circuit. While it may seem like just an esoteric math problem, tiny optimizations can mean billions of dollars in large companies. Finding exact solutions to optimizations like this one would be a huge gain for companies.

D-Wave’s quantum computers are already being used to solve the traveling salesman problem and similar optimization problems. While the calculations are still limited by the small systems, future D-Wave systems could prove key to finding actual solutions to this an other optimization problems.

D-Wave’s Q1 2023 earnings show them to still be a highly speculative stock. They had revenue of $1.5 million, a net loss of $24.4 million, and $8.9 million in cash.  Investors should look to their next earnings report on August 10th to see where they are heading soon. But if their outlook improves, they could be the best quantum computing stock you’ll ever buy.

International Business Machines (IBM)

Photo of IBM (IBM) building as seen through the canopy of a tree. IBM logo is in large letters on side of building.

Source: shutterstock.com/LCV

International Business Machines (NYSE:IBM) is one of the largest players in quantum computing and one of the most promising quantum computing stocks to buy. One of the biggest challenges in recent years has been making quantum computers useful instead of just interesting. IBM is hoping to change that.

Two big weaknesses of modern quantum computing are that they have very few qubits and those qubits rapidly accumulate errors that end any useful quantum processing. IBM is pushing the boundaries in quantum error correction, thereby mitigating or reversing those accumulated errors. And they have announced a road map that will lead to a 100,000 qubit quantum computer. With enough qubits and a low enough error rate, genuine applications such as Shor’s algorithm are within reach. If IBM’s quantum computers can reach the general market, they could be the investing opportunity of a generation.

Still, quantum computers are only a small part of what IBM does. In the near term, IBM’s stock will move largely due to the actions of the rest of the company, not its quantum computing division. But that makes IBM a much safer investment than many of its quantum computing competitors. With quantum computers still in their infancy, the best quantum computing stock picks maybe those companies with enough cash to survive long-term.

In Q2 2023 IBM had revenue and net income of $7.6 billion and $1.6 billion respectively. Only slightly different from Q2 2022 where they had $7.6 billion and $1.4 billion respectively. But IBM’s stability is a blessing in an industry where many of the most hyped companies barely make revenue at all. And if IBM can survive where its competitors fail, it’ll prove itself as the best quantum computing stock you can pick.

IonQ (IONQ)

IBM Q System One Quantum Computer at the Consumer Electronic Show CES 2020. Quantum computing stocks.

Source: Boykov / Shutterstock.com

IonQ (NYSE:IONQ) is a quantum computing company with some intriguing technology. Their latest quantum offering is the Forte with just 32 qubits. But IonQ hopes to network these computers together to make a modular design that can achieve any scale. And IonQ’s computers are made with trapped ion qubits. Qubits are notoriously unstable, but trapped ion qubits are the most stable of the bunch. Quantum computers must be long-term stable if they are to be useful as computers, so IonQ’s systems make them one of the best potential stocks to buy.

IonQ is also expanding its global reach and revenue. They recently announced that the Forte is now available worldwide.  And they are partnering with Switzerland’s QuantumBasel to bring more of their systems to Europe. Uptake will be key if quantum computers want to displace classical ones, and IonQ is working towards worldwide uptake.

IonQ’s Q1 2023 earnings report shows revenue growing rapidly year on year, from $2 million in Q1 2022 to $4.3 million in Q1 2023. However R&D expenses grew much faster, and net loss went from $4.2 million to $27.3 million. With $52 million in cash and cash equivalents and $336 million in short-term investments, IonQ can still burn cash to gain market share. But it must be said that they are still a speculative investment at this time

Still, quantum computing is poised to be the wave of the future. And with rapid growth, expanding reach, and key technology, IonQ is one of the most promising quantum computing stocks to buy today.

On the date of publication, John Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

John Blankenhorn is a neuroscientist at Emory University. He has significant experience in biochemistry, biotechnology and pharmaceutical research.