Amazon Joins Quantum Computing Race with Error-Correcting Chip, While D-Wave Quantum Offers Unique Approach

My Favorite "Magnificent Seven" Stock Just Joined the Quantum Computing Revolution (Hint: It's Not Nvidia) | The Motley Fool

Amazon just joined its "Magnificent Seven" peers Nvidia, Microsoft, and Alphabet in the quantum computing revolution. Toward the end of 2024, a new pocket of the artificial intelligence (AI) realm called quantum computing started receiving quite a bit of interest from the investment world. Seemingly overnight, stocks such as IonQ, D-Wave Quantum, and Rigetti Computing emerged as popular names leading the quantum computing charge. Smart investors understand that just because a company begins rising in popularity doesn't necessarily make it a sound investment choice, though. While the companies above have witnessed pronounced gains over the last few months, much of the buying activity is rooted in momentum-driven narratives. As I've previously expressed, if you're going to explore investing in quantum computing, then I think the most prudent options revolve around "Magnificent Seven" members like Nvidia or Alphabet. Just a few days ago, my favorite Magnificent Seven stock, Amazon (AMZN 0.96%), announced an interesting development as it pertains to the company's quantum computing efforts. Below, let's explore how Amazon is making a splash in the quantum revolution and assess how it could help supercharge the company's AI ambitions in the long run. Classical computing (which is what we use today) is built on a foundation of binary code or bits, such as 0 and 1. Quantum computing does not follow such a linear approach. In quantum mechanics, qubits (quantum bits) can exist in multiple states at the same time -- a phenomenon known as superposition. In theory, this approach allows quantum computers to process complex algorithms at faster speeds compared to today's classic computers. While this all sounds great, scientists at Amazon point this out: Vibrations, heat, electromagnetic interference from cellphones and Wi-Fi networks, or even cosmic rays and radiation from outer space, can all knock qubits out of their quantum state, causing errors in the quantum computation being performed. This decoherence results in high levels of qubit errors, a problem that Amazon is looking to solve. The company's new quantum chip, dubbed Ocelot, integrates error correction into its architecture. This is a unique approach, as it implies that fewer qubits need to be integrated to counter error correction. As such, computation processes should be more efficient (less expensive), which potentially gives Amazon an edge as it looks to build a quantum platform that can be easily scaled. Over the last couple of years, Amazon has invested billions into an aggressive AI infrastructure plan. Some of the company's more notable moves include investing $8 billion into Anthropic, as well as developing its own custom silicon solutions -- Trainium and Inferentia chips. So far, Amazon's rising capital expenditures (capex) appear to be paying off. The company is witnessing notable acceleration in its cloud infrastructure business, Amazon Web Services (AWS), coupled with rising profits. The combination of accelerating revenue and widening profit margins is providing Amazon with the financial flexibility to double down on its AI infrastructure investments, which now include a foray into quantum computing. While the company should continue to witness competition from Microsoft and Alphabet, I think Amazon's differentiated approach with Ocelot as it relates to scalability could lead to faster customer acquisition. As a result, I see quantum computing as an exciting new chapter for AWS -- and one that could lead to even further revenue and profit growth in the long run. Over the past month, Amazon stock has fallen by about 11%. While some of the selling is likely tied to macroeconomic concerns surrounding inflation or the unknown impacts of new tariff policies out of Washington, I do think there is some perceived risk at it relates to Amazon specifically. Namely, the company's management is guiding for over $100 billion of capex spending just this year. I think some investors may be skittish over that huge sum. But as I pointed out above, the majority of the company's capex spend has been geared toward AWS -- a business that is accelerating across both the top and bottom lines. Nevertheless, investors don't seem to have bought into Amazon's aggressive growth strategy. Right now, Amazon stock trades for a price-to-free cash flow (P/FCF) multiple of 69 -- well below the company's five-year average of 104. I find this disparity a little ironic considering Amazon is a larger, more profitable business today than it was years ago. Moreover, I think the company's current growth levels have a good chance of rising further as AI becomes more integrated across Amazon's broader ecosystem. The company's exploration of quantum computing underscores Amazon's commitment to building a diversified AI platform, and I think it will represent yet another investment that pays off in spades in the long run. To me, Amazon stock is a bargain right now for investors with a long-term time horizon.

These 2 Artificial Intelligence Stocks Could Be the Best Buys in the Quantum Computing Revolution | The Motley Fool

Quantum computing stocks are receiving outsized attention as it emerges as AI's newest breakthrough. For the last couple of years, investors have learned how artificial intelligence (AI) is paving the way for a new frontier in the technology sector. At this point, it's common knowledge that AI is used for developing software, building large language models (LLMs), and even training autonomous vehicles. While these applications are exciting, a new pocket of the AI realm is starting to receive quite a bit of attention. Stocks including Rigetti Computing, D-Wave Quantum, and IonQ have witnessed quite a bit of action over the last few months, as each of these companies claims to be leading the charge in AI's "next big thing" -- quantum computing. The temptation to follow momentum into little-known opportunities is very real. After all, what if one of these companies becomes the next millionaire-maker AI stock? Although I understand this line of thinking, I'd encourage potential investors to take a step back and remember that Rigetti, D-Wave, and IonQ were all penny stocks less than a year ago. Instead of buying into a narrative, investors are better off focusing on existing leaders in the AI market and assessing which of those companies may parlay its accomplishments into quantum computing. Let's explore two companies that I think are poised to make a splash in the quantum computing arena, and assess why each looks like a great buy right now. My hunch is that you're already familiar with Alphabet (GOOG 1.18%) (GOOGL 1.06%) since the company operates two of the most visited websites on the internet -- Google and YouTube. While Alphabet derives most of its sales through advertising, the company has made investments in AI-powered services to bolster its business model, which now supports workplace productivity tools akin to Microsoft's Office suite, cybersecurity solutions, cloud computing infrastructure, and hardware devices such as mobile phones. In addition to its existing AI products, Alphabet has also been quietly exploring the area of quantum computing. Back in December, the company revealed that its quantum chip, dubbed Willow, demonstrated reduced error rates and astonishingly fast computational speeds during an experiment. Specifically, Willow's superior processing power solved a problem in five minutes that would otherwise have taken the most sophisticated supercomputers 10 septillion years to crack. Indeed, this is impressive work from Alphabet. But I think this case study underscores one thing above all else: Quantum computing doesn't have much application today, given where things currently stand in the AI revolution. Nevertheless, I actually see that dynamic as a benefit for Alphabet. The company already has an established footprint in the AI market, and given Alphabet's hugely profitable business, the company has the financial flexibility to explore and build best-in-class products in emerging areas. So even if Willow isn't a money-making machine for Alphabet today, the company's accomplishments have me optimistic that quantum computing will at some point become further integrated into Alphabet's existing AI suite, further separating the company from an intense competitive landscape. International Business Machines (IBM -0.31%) has developed a series of quantum computing processors known as Heron, Condor, Eagle, and Osprey. However, it's the company's software platform that has me most excited. IBM offers a quantum computing software application called Qiskit. Qiskit is a software suite marketed toward quantum developers. Some of the selling points of the platform are that it helps streamline workflows, assists with code generation, and provides cloud-based infrastructure to run workloads across various devices. For me, IBM is flying under the radar in both the AI race and specific quantum computing use cases. While many quantum computing companies are still experimenting in theory-based advancements, IBM has a unique opportunity to build end-to-end quantum infrastructure through a combination of its hardware processors and the Qiskit software suite. This could be a major differentiator from other companies developing quantum computing products and one that could help IBM begin to really scale as the AI movement heats up.

1 Reason to Buy This Artificial Intelligence (AI) Quantum Computing Stock on the Dip | The Motley Fool

In 2024, nearly any company dealing with quantum computing or artificial intelligence saw its valuations soar. These two fields created some of the hottest investment opportunities in years. And while long-term projections are still rosy in terms of growth, the share prices for many of these next-gen businesses saw a correction in early 2025. If you've been waiting for a chance to buy into these breakthrough businesses, now might be your chance. One quantum computing stock, in particular, looks very attractive following the pullback. When it comes to quantum computing stocks, D-Wave Quantum Inc (QBTS -1.44%) has some clear differentiators compared to the competition. When you look at the biggest quantum computing companies, the list is topped with big tech companies with big budgets. While none of the big tech competitors specialize solely in quantum computing, they have the research and development strength plus the personnel and partnerships necessary to make big advancements in the space. With a market cap of just $2 billion, D-Wave is clearly a different business. However, there are benefits to its smaller size and singular focus. D-Wave focuses on a process called quantum annealing, a specific approach to quantum computing. This approach specializes in solving discrete optimization problems, such as finding the best delivery network path for a fulfillment operator or how to minimize material usage for a product manufacturer. Gate-based quantum computing, on the other hand, is what most big tech firms are focusing on. This focus is more versatile, with arguably greater long-term potential. However, D-Wave's approach can be more immediately applied to real-world problems today, which is why it is one of the only quantum computing firms that can actually sell its devices directly to businesses and consumers. It's still not clear whether quantum annealing or gate-based quantum computing will win out in the long term. But D-Wave's focus on quantum annealing, combined with its early entrance into commercial markets, could give it a long-term edge in this still nascent industry. There are risks here, but if you're looking for big growth potential, I think there's a major reason to buy D-Wave stock today at its $2 billion valuation. Investors looking to buy into D-Wave stock today should be those who are focused on hitting huge home runs. D-Wave's commercialization efforts are just getting started, and its research and development capabilities pale in comparison to big tech competitors. However, some forecasts are calling for at least $1 trillion in additional global GDP by 2035 due to the adoption and accelerated innovation of quantum technologies. Many companies will be needed to supply that growth, and D-Wave's valuation remains only a fraction of its long-term potential should its technological approach prove correct. While I'd love to mark D-Wave as an obvious diamond in the rough, the truth is that it's still too early to tell. Many dominos still need to fall in the quantum computing space for the future to become clear. Which technologies will ultimately win out, who will be the biggest adopters, and when all this growth will finally occur remains unknown. However, that's partially why D-Wave's valuation is where it is despite its early success in what could ultimately become the next big thing following today's AI revolution. D-Wave stock is a buy right now, but only for very patient investors swinging for the fences.