The next breakout technology may be a combination of two already-emerging ones: quantum computing and generative AI.
Quantum artificial intelligence (AI) involves the use of quantum computers to enable AI systems to process information faster with fewer resources. This concept is still in the research phase (neither generative AI nor quantum computing has achieved widespread commercial adoption), but the potential value of combining these two technologies is already attracting early movers that aim to establish themselves on the pick-and-shovel side of the opportunity.
Among those early movers, Google parent Alphabet (GOOGL -2.07%) and D-Wave Quantum (QBTS -5.82%) belong on your long-term investment watch list because of their exposure to this burgeoning technology.
Alphabet
Alphabet arguably sparked the market’s latest hype cycle over quantum computing in late 2024 when it debuted Willow, a state-of-the-art quantum chip that achieved major success in reducing the error rates that such chips are prone to.
While Willow is still thousands of times more likely to produce errors than a classical chip, what Alphabet has done shows that it is on track to create quantum computers suitable for practical large-scale use. Moreover, Willow performed a benchmark test computation in around five minutes that would take a classical supercomputer 10 septillion years to solve.
Machines with this level of raw computational power will have commercial applications in industries like drug discovery, logistics, and materials science. But their potential synergies with generative AI could be even more exciting.
In September, Google researchers released a paper suggesting that, beyond just solving complex problems, quantum computers could also generate results on their own. In other words, they can theoretically learn from data and produce useful outputs just like a large language model (LLM), but bigger — much bigger.
Instead of producing pictures of flying giraffes and vibe code, quantum-powered AI could map out as-yet unseen molecular structures, for example. The potential of this technology could transform the way people live and do business.
But even though Alphabet has established itself as an early leader in quantum computing, it is far from a pure play. The company’s massive online search business could still face disruption as people shift from using Google to querying LLMs like ChatGPT.
Yet Alphabet also has several cash cow businesses that will allow it to pour resources into quantum computing research and other technologies. In the second quarter, its revenue rose 14% year over year to $92.4 billion, while its net income jumped 19% to $28.2 billion.
D-Wave Quantum
D-Wave Quantum is not a diversified technology behemoth like Alphabet. Instead, it is a relatively small quantum computing pure play. It’s unique in the industry because it’s already selling commercially available quantum computers to organizations around the world — although this comes with some important caveats.
For starters, unlike the generalized quantum computing being developed by Google and other early movers, D-Wave is pioneering chips that use a technology called quantum annealing, which involves finding the lowest-energy solution to a particular problem. That could have huge applications in fields such as logistics (finding the most efficient routes to deliver large numbers of packages, for example).
D-Wave believes its quantum annealing technology could advance AI by helping customers build more energy-efficient, optimized workloads. It has released an open-source AI software tool designed to help developers integrate quantum processors into standard machine-learning architectures. The open-source approach could help D-Wave accelerate innovation at the intersection of AI and quantum computing while it focuses on other aspects of its business.
D-Wave continues to sell its quantum annealing technology to research institutions, and in the second quarter, its revenue surged 42% year over year to $3 million. That said, the company remains an incredibly speculative investment: Its operating losses jumped by 40% to $26.5 million in the period. Investors shouldn’t expect sustained profitability from D-Wave anytime soon.
Which stock is better for you?
Alphabet and D-Wave Quantum are both early leaders in quantum computing, but that’s largely where their similarities end. Alphabet is already a successful blue chip business with plenty of resources to pour into its quantum research. D-Wave is burning cash and may have to dilute existing investors by issuing more stock to stay afloat long enough to reach profitability — assuming it ever does. While D-Wave’s far smaller size gives it more potential for explosive growth if it achieves major commercial success with its technology, it is also a significantly riskier investment.
Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
