A bet on quantum computing – review of technology and analysis of investment attractiveness admin 12.02.2022

A bet on quantum computing – review of technology and analysis of investment attractiveness

Quantum technology has emerged as the latest breakthrough technology to attract the attention of governments, investors, and leading tech companies around the world. Despite the complex dynamics of the technology, investment has been pouring into the research and development of the technology. Thanks to these efforts, technology has been becoming increasingly accessible to researchers and tech startups around the world. This comes as a positive step because of the surge in cloud computing demand in recent times. Due to the prospects associated with quantum development, the technology holds the potential to become the most impactful technological progress in the upcoming decades. 

Insights into the Industry – By the Numbers 

According to a recent study by Pitchbook, over $1 Billion was invested by private equity firms into quantum technology in 2021. 

This figure represented a higher investment into the industry than the previous three years combined. The primary elements behind this growth have been attributed to the expansion of the industry. McKinsey estimates that the number of quantum computers in existence has increased from less than 10 to over 200 in 2021. This growth has become evident at a time where leading stakeholders in the quantum industry are expected to share further insights into the applications of their technology. 

  • IBM was the first major stakeholder in the industry to take a step forward and unveil the pathway moving forward. The company hinted towards the release of an 1121-qubit processor, which is being labeled as the first significant step in the commercial launch of quantum technology. 
  • Google has made a public announcement with claims of quantum supremacy based on the application of quantum technology to solve an existing polynomial speed calculation. 
  • ColdQuanta has announced the creation of a 100-quit processor in 2021, with potential 10-fold upgrades to the system within the next few years. 
  • PsiQuantum has expressed intent to deliver a comprehensive quantum computer by 2025. 
  • Microsoft has diverted a significant percentage of its innovation resources to quantum technology by creating dedicated labs within the company. The company has been focused on creating Azure-based quantum solutions for its global consumers. 
  • IonQ has partnered with the dMY technology Group to create an expansive network of quantum computers connected through cloud computing technology. Similar steps were taken by SuperNova Partners Acquisition Company by partnering up with Rigetti Computing. 

These innovative steps have been subsequently backed by enhanced investor interest in the quantum domain, with investments pouring into promising projects. Investment efforts into the industry have led to the creation of a quantum-focused ETF as well. 

Defiance Quantum ETF 

The Defiance Quantum EFT has been listed on the New York Stock Exchange and allows investors to invest in 70 individual stocks in the quantum space. The ETF brings together companies across the software and hardware domains to offer a promising investment opportunity to potential investors. With over $172 Million in assets, the fund has been expanding its holding across key players in the quantum space.  

Exploring Quantum Technology – How it Works 

Quantum computers are configured with qubit configurations. Qubits can be considered to be the quantum version of bits used in conventional computing technology. These Qubits are able to process and store massive amounts of data. This enables computer computers to perform exponentially better than conventional computers and deliver calculations that cannot be managed using conventional computing technology. 

The technology is expected to have widespread connotations of fields including supply chain, drug design, virtual reality, and practically every other industrial segment due to the sheer increase in processing power. Especially in the finance and automotive segments, technology is being viewed as a key step forward in ushering a new technological revolution. 

However, existing challenges in the quantum domain have been associated with the management of Qubits within the Quantum systems. Current attempts to scale up quantum technology have not been able to garner monumental results so far. However, the observed innovation in the quantum field promises a comprehensive overhaul in technological processing. 

Here are a few examples of how Fortune 500 companies are approaching the applications of quantum computing technology. 

  • Goldman Sachs has explored ways to implement quantum algorithms to improve existing asset pricing and risk management across different investment classes. 
  • Daimler has expressed interest in the application of quantum computing in the innovation of new building materials and design composites across its transportation design and configurations. Effective battery design has been a central area of focus for the company. 
  • BMW has been ramping up its strategy to implement quantum technology by launching a computing challenge in the quantum sector. The company has issued a call for innovators to come up with impactful solutions for the company using quantum technology. The efforts come as just another step by the automotive industry to harness the potential vested in quantum technology. For the challenge, the company partners with Amazon Web Services to explore viable applications that could help the car manufacturer push forward using crowd-sourced innovation. 

National Interest in Quantum Technology – A Global Approach 

Similar to other technological fronts, nation-states have been actively pushing to gain a competitive edge in the quantum industry. China currently leads innovative efforts with major strides in launching quantum-based products. Other countries, including the United States, Russia, Germany, and India, have also amplified resource allocation towards quantum initiatives to push the technology forward.

Here are some key steps that have been taken by leading countries around the world. 

  • The Indian Government has launched a Quantum-focused initiative with a budget of over $1 Billion for the next five years. 
  • The European Union (EU) has launched a similar initiative with a ten-year span to support value-based backing for the entire quantum technology. 
  • Russia was the first country to have a publically launched quantum computer prototype in 2019. 
  • Leading German organization Fraunhofer-Gesellschaft partnered with IBM to improve quantum technology and explore new prospects. 
  • The United States announced the launch of the National Quantum Initiative Act with over $1.2 Billion of authorized funding in the space over the next five years. 
A Quantum Future – DIF Insight  

Given the surge of investment and activity in the Quantum computing industry, a major breakthrough can be expected in the next three to five years. However, evaluation by DIF experts suggests a lack of practical quantum application so far by any stakeholder in the space. The potential expansion of investment and investor interest indicate an optimal timeline to explore viable investments in promising startups.