With the rapid development of quantum computing technology in recent years, investing in quantum computing has attracted more and more investors’ attention. As an emerging disruptive technology, quantum computing is believed to bring exponential growth in computing power and have wide applications in areas like cryptography, drug discovery, financial modeling and weather forecasting. However, the quantum computing industry is still in its early stage, full of uncertainty and risk. For investors interested in this field, it is important to understand the potential and challenges of quantum computing, evaluate the pros and cons of different investment options, manage risk properly and remain patient. This article provides insights into the investment strategies, opportunities and risks regarding quantum computing.
The great potential of quantum computing creates attractive investment opportunities
The exponential leap in computing power promised by quantum computing has made it an appealing investment area. Market research predicts that the global market of quantum computing will grow from $472 million in 2020 to $6563 million by 2027. Government funding and venture capital investment in quantum computing startups have been surging rapidly. For example, public companies like IBM and Google, as well as many venture-backed startups like Rigetti Computing and IonQ have received billions of investment in quantum computing research. The applications of quantum computing in areas like cryptography, pharmaceuticals, clean energy and finance can be highly rewarding. Overall, quantum computing shows great potential in solving computational problems beyond the reach of classical computers and enabling breakthroughs across different industries. Despite high risks, the prospects of extraordinary returns still make investment in quantum computing startups intriguing for investors with high risk tolerance.
Direct investing in quantum computing stocks has high risks
For investors who want exposure to the quantum computing sector, the most straightforward way is to invest in public companies specializing in quantum computing such as IBM, Google, Microsoft, Honeywell and Rigetti. However, while these companies have been front-runners in quantum computing research, their business models are not fully dependent on quantum revenue so their stock price may not fully reflect the growth potential. Besides, most quantum computing companies are still loss-making and may remain so for an extended period of time. Investing in individual stocks would subject the investor to high volatility risk. As quantum computing is still an emerging, capital-intensive field, investors need strong nerves and sufficient capital to weather the ups and downs before the industry matures and becomes profitable.
Quantum ETFs provide more diversified exposure
For investors looking for diversified access to the quantum computing space, a few quantum computing ETFs have been launched recently, such as the Defiance Quantum ETF (QTUM) and the Invesco NASDAQ Next Gen 100 ETF (QQQJ). These ETFs hold a basket of stocks so that risks are diversified across different companies. The downside is that quantum computing stocks often only make up a small portion of the total holdings. Investors need to assess the fund composition carefully to ensure sufficient exposure. Also, management fees of ETFs will eat into investment returns in the long run. Overall, quantum ETFs can be a moderate risk option for investors who want some exposure but are unwilling to bet heavily on individual quantum stocks.
Venture capital investment targets early-stage startups
More risk-tolerant investors can consider venture capital investment targeting quantum startups. As an early investor, venture capital investment can produce outsized returns if the startup succeeds in developing commercially viable quantum computers and executes successful exit strategies like IPO. However, the failure rate of startups is also very high. Thorough due diligence is required to evaluate the startups’ technology, talent and business plan. Venture capital portfolios can mitigate risks by investing in a basket of startups. While success of any individual startup is uncertain, the overall portfolio return can be positive. This route is only suitable for professional investors with deep knowledge and networks in this domain as well as high risk appetite.
Quantum computing is an emerging technology with great disruptive potential but still at an experimental stage. Various investment options are available for investors with different risk appetite and return objectives. Careful assessment of potential upsides and downsides is necessary. Patience is also required as quantum computing may take time to commercialize and become profitable on a large scale.