Quantum Computing Explained for Investors

Quantum computing was named a breakout technology in 2017 by the Massachusetts Institute of Technology. It showed up again on the list for 2020. Does that mean quantum computing is ready for prime time? Possibly. That is good news for the world, but the problem is few know what a quantum computer actually does—and investors don’t know what quantum computing means for their portfolio.

Where to start?
(ticker: MSFT) is a large quantum player. And looking at its quantum business can help frame the issue for investors—and anyone else.

Quantum in Pop Culture

It’s helpful to start a few steps back from Microsoft’s quantum aspirations.

Many people have heard of the quantum realm, thanks in large part to
Walt Disney’s
(DIS) Marvel Cinematic Universe. The Avengers, after all, defeated Thanos in Avengers: Endgame—the highest-grossing film of all time—with the help of quantum tunnels. And the Guardians of the Galaxy navigated a quantum asteroid field in their latest stand-alone film.

In the quantum asteroid field, rocks popped in and out of existence. The idea being that in the quantum realm, almost anything is possible. Quantum has become an analogy for weird, counterintuitive outcomes.

Quantum in a Nutshell

Quantum physics does indeed dictate a bunch of weird things, including particles—not the size of asteroids—popping in and out of existence.

Physicist Richard Feynman said once that all people need to know about quantum physics is the double-slit experiment.

In the experiment, a single electron—which is a negatively-charged subatomic particle—passes through both slits at the same time. Very weird. But that is because particles have wavelike properties. A wave of water would hit both slits.

So an electron behaves like a wave. OK. But here’s the thing, if someone watches the experiment unfold—putting a detector in front of the slits—the electron stops acting like water. It goes back to being a particle. Weird.

Quantum Benefit for a Computer

That, curiously, has some benefits for a computer. In a traditional computer, a bit—the basic unit of computing power—can have a value of one or zero. A quantum bit, more commonly called a qubit, is the basic unit of quantum computing. It can have a value of one or zero or anything in between—at the same time.

There are other things qubits can do, but multiple, simultaneous values makes quantum computers faster. A 64-bit computer can have roughly 18 quintillion (18 with 18 zeros) values. If a computer can do 2 billion values per second, it will take roughly 300 years to go through all potential values.

A 64-bit quantum computer can have, in theory, all 18 quintillion values at once. Go figure.

Development of Quantum Computers

MIT put quantum computing back on its technology list in 2020 because a quantum computer with 53 qubits built by Google parent
(GOOGL) did a calculation, in about three minutes, that would have taken a traditional computer 10,000 years.

Quantum supremacy was demonstrated. Great. So when will consumers be buying a quantum desktop, and when will investors be bidding up Alphabet stock on exploding quantum sales?

Enter Microsoft Quantum

Not yet.

“Qubits are not reliable yet. There is noise,” Stephen Jordan, Microsoft quantum principal researcher, told Barron’s. People are still working out the hardware. There are, for instance, superconducting qubits, trapped-ion qubits, and topological qubits.

Picking between qubits isn’t like beta or VHS, or a Mac versus a PC. With today’s computers underlying hardware is the same and “100{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} reliable,” adds Jordan.

The industry is still working out the hardware. “To reduce the noise, usually, you take qubits and string a bunch together to make a computing qubit,” explains Helmut Katzgraber, Microsoft quantum principal research manager.

Quantum Intel?

Microsoft, of course, is known for software. Maybe that means what the quantum computing industry needs is quantum
(INTC), pumping out the quantum equivalent of silicon chips with 1 billion transistors on them. (A transistor can store a bit—a one or zero—as information.)

For Katzgraber, the qubit hardware industry will be like FPGA, short for field programmable gate arrays, which are integrated circuits that can be configured into ASIC, short for application-specific integrated circuits.

(XLNX) makes FPGAs. They get their supply from businesses like
Taiwan Semiconductor Manufacturing
(TSM), and Taiwan Semi gets silicon from a company like
Lam Research

There is now a quantum value chain like that.
Honeywell International
(HON) can make trapped-ion qubits. That is probably as close as investors have to a quantum supplier at this point.

The Quantum Future

Hardware doesn’t have to come before software and applications though.

“We have gone through computer creation before,” says Katzgraber. “We are doing the whole stack—the software to the qubits—all at once.”

That speeds development, but doesn’t mean there will be a quantum smartphone soon—or sooner than it took to go from mainframe to desktop, to laptop to iPhone. Quantum computing will probably look a little different. “These [systems] will live in data centers in the cloud,” adds Jordan.

Along with hardware comes apps. And a killer quantum app will help elevate the technology from MIT’s tech review to the nightly news. There are areas where the existing tech is having an impact. Julie Love, Microsoft quantum applications team leader, tells Barron’s about several problems being addressed now from traffic light optimization to industrial catalyst for chemical production.

The Quantum Stocks

For now, big tech is big quantum. Google, Microsoft,
(IBM), and
(AMZN) have quantum aspirations. Honeywell has its toes in quantum waters too. It’s tough to buy any of those stock as a quantum investment yet.

Superconductor makers don’t talk about quantum computing much in filings either. And superconducting is only a $2 billion industry at the moment.

Quantum computing remains a watch item for investors—albeit an interesting one.

Write to Al Root at [email protected]

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