Quantum Computing Stocks: Key Insights for Investors Following Major Tech Announcements
Recent developments in quantum computing are captivating investors on Wall Street. In December, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) made significant strides with its Willow chips. Following that, in January, Microsoft introduced its Quantum Ready program, aiming to enhance business understanding of this cutting-edge technology.
Despite the initial excitement that propelled stocks of companies such as D-Wave, IonQ, and Rigetti Computing, a stark decline ensued after Nvidia and Cisco CEOs indicated that practical quantum computing applications may be over 20 years away.
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Read on for an in-depth analysis, including my top pick for a quantum computing stock.
Understanding Quantum Computing and Its Significance
Traditional computers use binary digits known as bits, which can be either a 1 or a 0. These bits function through transistors (tiny switches) that toggle rapidly, managing electrical flow to process information.
In contrast, quantum computers utilize quantum bits or qubits, which can represent both 1 and 0 at once. This property allows quantum computers to execute specific calculations much faster than traditional computers, opening doors to solving complex problems more efficiently.
Although practical applications are still being developed, experts foresee quantum computers revolutionizing fields like data encryption, drug discovery, investment optimization, and advanced AI training.
Recent Breakthroughs by Alphabet in Quantum Computing
In December, Alphabet’s Google unveiled its new quantum chip, Willow. In their announcement, the company claimed, “Our new chip demonstrates error correction and performance that paves the way to a useful, large-scale quantum computer.” They highlighted two key achievements:
- Traditionally, increasing the number of qubits resulted in more errors. However, Google asserts that Willow reduces errors as more qubits are added.
- Willow completed a random circuit sampling benchmark—the most challenging task for current quantum computers—in under five minutes. In contrast, the best supercomputer would take 10 septillion years (10 followed by 24 zeros) to solve the same problem.
These advancements position Google within a roadmap consisting of six steps toward commercially viable quantum technology, with the first two steps taking over a decade to achieve.
Initially, the market reacted with enthusiasm, boosting the shares of D-Wave and Rigetti by approximately 110% and 280%, respectively, in the wake of the Willow announcement. Yet, after Nvidia’s CEO stated that practical quantum computing is still decades away, these stocks plummeted by about 50%. Investors ought to reconsider buying into these companies since both boast exorbitantly high price-to-sales ratios close to 100 and are not generating free cash flow.
Why I Believe Alphabet is the Top Quantum Computing Stock for 2025
Currently, I view Alphabet as the premier quantum computing stock worthy of investment. With its success in developing Willow, the company stands at the forefront of quantum technology. There is potential for revenue generation from the chip soon. However, even in the absence of that, Alphabet possesses thriving businesses in ad tech and cloud computing, which should promote consistent earnings growth moving forward.
Alphabet’s Google is not only the largest digital advertiser but also the third-largest public cloud service provider, based on sales. Expected growth rates for these markets are about 10% annually for digital advertising and 19% annually for cloud services through 2028. The company is leveraging its artificial intelligence expertise to explore new revenue opportunities within both sectors.
Wall Street anticipates a 14% rise in Alphabet’s earnings over the next four quarters, positioning its current valuation at 26 times earnings as reasonable. Nonetheless, analysts may be underestimating Alphabet’s potential for growth. The company has consistently exceeded consensus earnings projections over the last six quarters, with average earnings beating estimates by about 10%, according to LSEG data.
For long-term investors, those looking at a time frame of three to five years should consider purchasing a small stake in this stock now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Cisco Systems, 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.