TQD Exclusive: Investing in Quantum Computing

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Wall St Quantum Computing
Crossroads of Wall S and Broad St. Source: Unsplash
Given Quantum Computing’s stage of development, achieving targeted exposure to the sector still proves to be challenging.

Given the increasing hype we have seen across Quantum Computing over the last year, we at The Quantum Daily are often asked, “how do I get in on this?” Hordes of would-be Cryptocurrency and CRISPR investors are constantly on the look out for the next quick-win, hoping to make >100x returns on their investment. Unfortunately, the short answer is that it’s not easy to invest purely in Quantum Computing. We explore this in more detail below.

  1. The vast majority of Quantum Computing companies are small and private

Despite increasing press, the Quantum Computing market continues to be relatively nascent – the purview of Universities and Governments rather than Institutional Investors. There are  about 100 private Quantum Computing companies globally with only a few of these getting more than a few million dollars of investment from venture capital companies or government institutions (Psi Quantum being a notable recent exception). Interest and investment are mounting, but it’s hard for a retail investor to get in on these fundraises.

Graph quantum investment

  1. Investing in relevant publicly listed companies gives limited exposure to Quantum Computing

There are now multiple publicly listed companies globally investing in Quantum Computing Research (coming from different angles). To name a few in no particular order:

  • Google
  • IBM
  • Alibaba
  • Amazon
  • Honeywell
  • Intel
  • Microsoft

These businesses are coming at Quantum Computing from different angles; some are building Quantum Computers, others are looking at ways they can harness the technology. Common to all, however, is that none of them are making any material revenue from Quantum Computing. Investment in development continues to be a cost centre for all these organisations. Google generates most of its revenue from advertising. IBM made $80 billion of consolidated revenue in FY2018, none of which was from Quantum Computing.

Given the technological barrier to succeeding in Quantum Computing, it is not absurd to assume that one of the above incumbent players will generate revenue from the market in the future, however it’s simply too early to tell who will benefit and indeed, how.

  1. Investing in an ETF may diversify risk and avoid the risk of having to call a winner, but is unlikely to lead to outsize, targeted returns

It is now possible to invest in a Quantum Computing and Machine Learning ETF, provided by Defiance ETFs which started in September 2018 and was in the news back in November 2019 for showing outperformance vs. the index. As you can see on p15 of their indexing guide, and in the below, this is essentially an investment in a collection of businesses with varying exposure to Quantum technologies. The top 3 constituents include a space technology company (Maxar), an automotive software company (Cerence) and hard disk manufacturer (Western Digital).

Holdings Defiance
Source: Defiance ETFs

Whilst these could of course, benefit from Quantum Computing and presumably have relevant initiatives, this is not a targeted investment in an emerging Quantum Computing player like you may be able to achieve in other emerging markets (e.g. eSports).

Nonetheless, the opportunity is real

None of this should discourage a potential investor in the space. Whilst it may be hard to get targeted exposure to Quantum Computing companies, interest and private investment is clearly mounting. Get up to speed now so you’re ready for when opportunities do come about.

Disclaimer: writers for The Quantum Daily may hold securities discussed in content published on the website. This article is not a recommendation to buy or sell securities. 

At The Quantum Daily, we look to provide incisive, informative information on Quantum Computing. We will look to build on this information and update on a regular basis. Please do contact us if you have any questions.