Investing in innovative technology can generate high returns once more people catch on to the opportunity. Quantum computing is one of those technologies that has rewarded shareholders in recent years but still remains in the early innings. This has led to the rise of quantum computing stocks to buy.
Quantum computing enables quicker calculations and more efficiency. This technology can solve problems that traditional computers cannot. This technology revolves around quantum physics and enables more possibilities than classical computers using binary approaches (i.e., 0’s and 1’s) to process information.
The technology already has already improved our processes in areas like risk management, research & development, and supply chain management.
Investing in quantum computing stocks can yield high returns, and many corporations are investing in the technology. Investors looking for exposure to the industry may want to consider these top quantum computing stocks.
Alphabet (GOOG)
Alphabet (NASDAQ:GOOG) makes the majority of its revenue from its ad network. In the second quarter, Google advertising generated $56.3 billion, or 80.8% of the company’s revenue. The advertising market’s recovery can lead to more revenue and earnings growth, but that’s not the only thing Google has going for it. The conglomerate has expanded into other areas to diversify its income streams, including quantum computing.
Google’s Quantum AI is working on technologies that will give researchers more resources and enable them to operate beyond classical capabilities. The company has also developed a quantum computer that is 47 years faster than the world’s fastest supercomputer.
That type of speed can expand artificial intelligence’s capabilities. Alphabet has the capital to become a leader in the quantum computing industry and has a long history of rewarding shareholders. Alphabet shares are up by 45% year-to-date and have gained 110% over the past five years. The company has a 28 P/E ratio and a $1.65 trillion market cap.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has also rewarded long-term shareholders, generating a 38% year-to-date gain and more than tripling over the past five years. The company also has ambitious goals that revolve around quantum computing.
Microsoft CEO Satya Nadella stated that the company aims to “compress the next 250 years of chemistry and materials science progress into the next 25.” Microsoft Azure has several quantum elements that help scientists solve more complex problems. The corporation is also working on a quantum supercomputer.
While investors wait for developments in quantum computing, they have plenty to like about Microsoft’s business model. Revenue increased by 8% year-over-year in Q4 Fiscal 2023. Net income increased by 20% year-over-year during the same time.
Microsoft Cloud makes an outsized percentage of total revenue. The cloud segment accounted for $30.3 billion out of the company’s $56.2 billion in Q4 Fiscal 2023 revenue. That’s 53.9% of the company’s total revenue. Cloud revenue can gain momentum as quantum computing strengthens Microsoft Azure’s value proposition.
IonQ (IONQ)
IonQ (NASDAQ:IONQ) is a pure-play speculative quantum computing stock that is unprofitable but has high revenue growth. Investors will have to swallow a lofty valuation of a 239 price-to-sales ratio. The 6 price-to-book ratio looks more palatable but still leaves much to be desired.
IonQ has positioned itself as the first mover and a leading player in the quantum revolution. The company expects to generate double the bookings next year and anticipates delivering the first quantum system in Europe in 2023. Being a first in an industry with large potential has helped the company command a sky-high valuation.
The company reported $4.3 million in revenue in the first quarter. That’s above the company’s high end of its guidance range and more than double last year’s revenue, which was $2.0 million.
IonQ holds onto cash and cash equivalents of $525.5 million which makes up more than 10% of the company’s market cap. The company also increased its full-year revenue outlook from $18.8 million to $19.2 million.
Investors can agree that IonQ is growing at a fast clip. It’s hard to argue with triple-digit revenue growth. However, rising losses and a lofty valuation make this stock a speculative play in quantum computing. The company can reward shareholders immensely if it becomes a leader in the industry, but this most certainly is a high-risk, high-reward stock. Shares have surged 348% year-to-date but are only up by 41% over the past five years, demonstrating the dramatic price swings the stock has experienced so far.
On this date of publication, Marc Guberti did not have (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.
