Quantum Computing vs. Traditional AI: The Investment Landscape in 2025

Nvidia and Alphabet Are Leading the Quantum Computing AI Race. But Are They a Buy? | The Motley Fool

Quantum computing stocks have seen quite a run-up in recent months, but determining which companies are leading the charge can be tough to navigate. For the past few months, quantum computing stocks such as IonQ, Rigetti Computing, and D-Wave Quantum have garnered a lot of attention and witnessed pronounced run-ups in their share prices. The momentum each of these stocks is experiencing certainly makes the idea of quantum computing a tempting investment opportunity. But as I've expressed previously, I'd caution from following the crowd when it comes to mainstream quantum computing stocks. Instead, I'd suggest turning to big tech -- and in particular, Nvidia (NVDA -3.12%) and Alphabet (GOOG 1.16%) (GOOGL 1.13%). Isn't Nvidia just a chip company? And isn't Alphabet just an advertising behemoth? Believe it or not, both of these "Magnificent Seven" members are leading the charge in the quantum computing movement behind the scenes. Let's explore how Nvidia and Alphabet are playing a role in quantum computing and assess if either of these stocks are good buying opportunities right now. Nvidia specializes in designing chipsets known as graphics processing units (GPUs). GPUs are the hardware that process algorithms and sophisticated computations that help train generative AI applications, such as large language models and machine learning protocols. However, one aspect of Nvidia's business that is unique is its tight integration between hardware and software. The company also offers a software suite called Compute Unified Device Architecture (CUDA), which layers on top of Nvidia's hardware stack. Within the CUDA ecosystem, Nvidia offers a tangential platform known as CUDA-Q that focuses specifically on quantum computing development. CUDA-Q is marketed as a "unified programming model." In simple terms, the CUDA-Q architecture allows for seamless integration between GPUs, central processing units (CPUs), and quantum processing units (QPUs), all in a singular platform. Recently, the company announced that Google is leveraging CUDA-Q and H100 GPUs to power simulations that will help in designing the search giant's quantum computer. To me, the subtle idea here is that Nvidia continues to unlock opportunities for becoming both the primary hardware and software provider for major corporations, and their various explorations of AI products and services. Although Nvidia remains the dominant force in semiconductors, it's important to note that many hyperscalers including Alphabet have been exploring developing their own chipware. Back in December, Alphabet made a major announcement as it relates to its quantum computing ambitions. Specifically, Google Quantum revealed that its new quantum chip, dubbed Willow, was able to perform a computation in less than five minutes that would otherwise take today's most capable supercomputer 10 septillion years to figure out. While Nvidia and Alphabet have made notable progress in the field of quantum computing, it's important to take a step back and consider some important details. For example, even though Alphabet's Willow chip possesses immense processing power, does figuring out a problem that would take 10 septillion years really matter right now? Personally, I think the answer is "no." And while CUDA-Q appears to already have gained some impressive traction, I'd caution investors from buying into the idea that this specific part of Nvidia's business will make a meaningful financial impact anytime soon. NVDA PE Ratio (Forward) data by YCharts. Right now, Nvidia is trading at a forward price-to-earnings (P/E) multiple of 46.6. Notably, this is much lower than the company's forward P/E from even just a few years ago. Considering Nvidia is a much different business today and consistently generates record growth across sales and profits, the current contraction in valuation multiples suggests Nvidia is not only reasonably priced, but it could be seen as cheap right now. In a similar fashion, Alphabet's forward P/E of 22 is identical to its three- and five-year averages. I think investors may be discounting Alphabet's potential given the fierce competition the company faces in advertising from Meta Platforms and TikTok, and the challenging market dynamics in cloud computing, which is currently dominated by Amazon and Microsoft. I think concerns surrounding Alphabet are misaligned. Despite various competitive landscapes, the company remains a dominant force online thanks to Google Search and YouTube, and its cloud computing platform is swiftly becoming Alphabet's next big generator of accelerating cash flow. At the end of the day, I think both Nvidia and Alphabet are stocks to buy hand over fist -- but not necessarily because of quantum computing. While I think quantum computing could become a major contributor for both businesses at some point, I think there are more clear near-term catalysts underscored by other pockets of the AI realm that will influence their respective growth.

Quantum Computing vs. Traditional AI: Which Tech Stocks Are Must-Haves in 2025? | The Motley Fool

Quantum computing has suddenly become a buzzword on Wall Street. Ever since Alphabet (GOOG 1.62%) (GOOGL 1.60%) reported that it hit a new milestone with Willow, its new quantum chip, quantum stocks have been soaring. It said that Willow can reduce errors exponentially as it scales up, and it performed a standard benchmark computation in just five minutes that would take one of the world's fastest supercomputers today 10 septillion years. The announcement sparked a rally in Alphabet stock and sent shares of small-cap pure-play quantum computing stocks like D-Wave Quantum (QBTS -9.29%), Quantum Computing (QUBT -9.65%), Rigetti Computing (RGTI -12.54%), and IonQ (IONQ -6.40%) skyrocketing. However, in January, those stocks plunged on pushback from multiple high-profile tech CEOs. First Nvidia CEO Jensen Huang said that "very useful" quantum computing was 15 to 30 years away. Just a few days later, Meta Platforms CEO Mark Zuckerberg echoed those remarks, saying he believed it was "quite a ways off from being a very useful paradigm." He also thought that "pretty smart AIs" would be available before quantum computing is useful. Even former Cisco Systems CEO John Chambers said Quantum Computing was further ways in the "AI decade". However, quantum stock leaders have jumped to defend the technology and their businesses. Investors should be aware that quantum computing is still an emerging technology. Companies like Quantum Computing, D-Wave Quantum, and Rigetti Computing have almost no revenue. IonQ is the largest of the four quantum stocks, but its 2024 guidance calls for just $38 million to $42 million in revenue, though revenue doubled in the third quarter. At a market cap of $9 billion, the stock trades at a price-to-sales ratio of more than 200, showing investors are betting big on the stock. The potential of quantum computing stocks is debatable, as is the timeline for it being disruptive, but between quantum and AI, AI is more deserving of your investment dollars. That technology is already here, growing quickly, and disrupting a wide range of industries. AI stocks also have more room to run. Keep reading to see two worth buying today. Micron Technology (MU 3.07%) is best known as a supplier of memory chips, but these days, the company is seeing a surge in demand from AI, like many of its peers. Revenue in its fiscal first quarter, which ended in November, jumped 84% to $8.7 billion, but what really stood out was its growth in the data center, where revenue jumped more than 400% on a year-over-year basis and 40% sequentially, which management attributed to strong AI demand. Micron also has a close working relationship with Nvidia, which is believed to be its biggest customer, and its stock recently bounced after Nvidia said it was using its chips in its new Blackwell platform. Right now, Micron also looks like an appealing opportunity for investors because the stock tumbled after its recent earnings report on weak guidance. However, management said it would return to strong growth, which could pave the way to significant gains for the stock. At a forward P/E of 14, the stock looks cheap for its growth potential. Another AI stock that looks like a must-have in 2025 is TSMC (TSM -1.53%), or Taiwan Semiconductor Manufacturing. TSMC is the world's largest contract chip manufacturer, handling production for the likes of Nvidia, Apple, Broadcom, and others. That gives TSMC tremendous market power, as it has market shares is more than 50% in third-party chip manufacturing, and roughly 90% in advanced. In many ways, it's a linchpin in the global economy. In the fourth quarter, the company continued to push its lead in advanced chips as 74% of its revenue now comes from advanced chips, which it considers to be 7 nanometers or less. TSMC's revenue growth came in at 38% and its operating margin nearly reached 50% in the quarter. With AI demand set to keep growing and a broader recovery in the chip sector afoot, TSMC looks set to have another strong year in 2025 and beyond.

Quantum vs. AI: Which tech stocks are winning the investment race?

Quantum computing has gained significant attention on Wall Street following Alphabet's (GOOG 1.62%) (GOOGL 1.60%) announcement of a milestone with its new quantum chip, Willow. Alphabet stated that Willow can exponentially reduce errors as it scales up, completing a standard benchmark computation in five minutes -- an operation that would take one of the fastest supercomputers today 10 septillion years. This announcement triggered a rally in Alphabet's stock and led to a surge in shares of smaller pure-play quantum computing companies, including D-Wave Quantum (QBTS -9.29%), Quantum Computing (QUBT -9.65%), Rigetti Computing (RGTI -12.54%), and IonQ (IONQ -6.40%). However, stocks in these companies saw declines in January after pushback from several prominent tech CEOs. Nvidia CEO Jensen Huang claimed that "very useful" quantum computing is 15 to 30 years away. Meta Platforms CEO Mark Zuckerberg shared a similar sentiment, asserting that useful quantum computing is quite distant and that "pretty smart AIs" will likely be available sooner. Former Cisco Systems CEO John Chambers stated that quantum computing is still a way off in the "AI decade." Despite this, quantum stock leaders have defended their technology and business prospects. Investors should note that quantum computing remains an emerging technology, with firms like Quantum Computing, D-Wave Quantum, and Rigetti Computing generating little to no revenue. IonQ is the largest among these companies, with a 2024 revenue guidance of $38 million to $42 million, although it doubled its revenue in the third quarter. Its market cap stands at $9 billion, resulting in a price-to-sales ratio exceeding 200, indicating substantial investor optimism. While the potential of quantum computing stocks is debated and the timeline for disruption is uncertain, traditional AI is currently more deserving of investment due to its rapid growth and disruption across various industries. We identify two AI stocks that are particularly favorable for investment in 2025: Micron Technology and TSMC. Micron Technology (MU 3.07%) is recognized as a memory chip supplier experiencing a surge in demand driven by AI technologies. The company reported an 84% increase in revenue during its fiscal first quarter, reaching $8.7 billion. Notably, its data center revenue grew more than 400% year-over-year and 40% sequentially, attributed to robust AI demand. Micron maintains a close partnership with Nvidia, believed to be its largest customer. Following Nvidia's announcement of using Micron's chips in its new Blackwell platform, Micron's stock rebounded. Although Micron's stock fell after a recent earnings report presented weak guidance, management indicated a return to strong growth is forthcoming, presenting a compelling opportunity for investors. With a forward P/E ratio of 14, the stock appears undervalued relative to its growth potential. Another AI stock projected to be essential for 2025 is Taiwan Semiconductor Manufacturing Company (TSMC) (TSM -1.53%). TSMC is the largest contract chip manufacturer in the world, producing chips for clients such as Nvidia, Apple, and Broadcom. The company commands over 50% of the third-party chip manufacturing market and approximately 90% of the advanced chip market, reinforcing its crucial role in the global economy. In the fourth quarter, TSMC reported that 74% of its revenue derived from advanced chips, classified as being 7 nanometers or smaller. The company achieved a revenue growth rate of 38%, with its operating margin nearing 50% during this period. With sustained AI demand and an anticipated broader recovery in the chip sector, TSMC is positioned for another strong performance in 2025 and beyond. Recently, leading AI companies have propelled the stock market, including Nvidia and Amazon, resulting in significant gains across the S&P 500, the Dow Jones Industrial Average, and the Nasdaq, each of which posted double-digit increases. As AI technologies continue to shape various industries, quantum computing, which leverages quantum mechanics for problem-solving, also continues its development. During the CES event, Jensen Huang suggested that practical quantum computers are about 20 years away, leading to a significant drop in shares for quantum firms like Rigetti Computing and Quantum Computing. Despite these challenges, quantum companies are advancing their technologies. Rigetti recently launched its 84-qubit Ankaa-3 system, achieving an accuracy milestone. Quantum Computing is also focused on scaling up crystalline lithium niobate for optical integrated circuits and is currently establishing a manufacturing facility. As the outlook for quantum computing remains cautious, Microsoft announced its "quantum ready" initiative for businesses to prepare for this emerging technology by 2025. Furthermore, Nvidia has scheduled its first Quantum Day for March 20, as part of its annual AI conference, to discuss advancements in the field, hinting at efforts to potentially shorten the timeline for useful quantum computing. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Prediction: Quantum Computing Will Be the Biggest AI Trend in 2025, and This Stock Will Lead the Charge | The Motley Fool

Quantum computing is fast becoming the next big opportunity in the artificial intelligence (AI) landscape. By now, I'm sure you realize that artificial intelligence (AI) is by far the biggest opportunity fueling the technology sector. Underneath the AI umbrella, semiconductor stocks have been some of the largest beneficiaries. This makes sense, as chipware serves a critical role in the development of myriad generative AI applications. However, over the last few months an area known as quantum computing has emerged as the latest shiny object in the AI realm. Below, I'll explore how quantum computing stocks have been moving as of late and later reveal my top pick for which company is paving the way for this new and exciting technology. Quantum computing represents an exciting new chapter in the AI narrative. Unsurprisingly, investors have been chomping at the bit to figure out ways to invest in quantum computing. Check out the trends in the chart below: Toward the end of 2024, shares of quantum computing stocks such as IonQ, D-Wave Quantum, Quantum Computing, and Rigetti Computing all experienced significant run-ups. Curiously, each of these companies was a penny stock at the beginning of 2024 -- only to see its valuation soar well into the billions during a rather short time period. While the moves above might suggest that these stocks are the "next big thing" in AI, I'd caution from following the herd mentality. Each of the companies above are development stage businesses. This means none is generating significant revenue, and all of them are consistently burning cash. In other words, the exponential gains illustrated in the chart above are features of meme stocks and not that of sound, prudent investment opportunities. Even though the share prices above may imply these stocks are cheap, valuation multiples indicate that none of them is deserving of a lofty price point. With all of this said, there are plenty of safer opportunities when it comes to quantum computing. A common business theory suggests that the people who became most rich during the Gold Rush were the vendors who sold picks and shovels, not the diggers searching for gold. The underlying idea here is that whenever a new theme emerges in the world of investing, it's often a good idea to identify the companies selling the metaphorical picks and shovels. When it comes to quantum computing, I see Nvidia (NVDA 3.10%) as the top opportunity. During a recent interview at the CES trade show in Las Vegas, Nvidia CEO Jensen Huang said that he thinks quantum computing won't really be scaled for another 20 years or so. I see pros and cons to this outlook. For companies such as IonQ, Rigetti Computing, D-Wave, and Quantum Computing, Huang's comments suggest that there's still a lot of work to be done before any of these businesses experience significant growth. In the interim, that likely means each of these companies will continue spending meaningful capital on research and development (R&D) and remain cash-burning operations. While that isn't a great situation for those companies, it can be a good opportunity for Nvidia. Developing quantum computing requires heavy investment in various AI infrastructure, including graphics processing units (GPU), data centers, and software. Nvidia supplies all three of these products, making the company a critical piece of the quantum computing movement. To me, Nvidia is the "pick and shovel" component of quantum computing development. In some ways, Nvidia has the luxury of being agnostic as to which companies actually make breakthroughs in quantum mechanics and which do not. Regardless, Nvidia's hardware and software is going to be involved. Considering quantum computing is likely decades away from reaching scale, this suggests that Nvidia has plenty of upside as more companies begin to explore this new area of the AI landscape. Although there are plenty of reasons to be bullish on Nvidia in 2025 and beyond, I see quantum computing as yet another tailwind that isn't even beginning to be priced into the company's long-term potential. I think Nvidia is a lucrative opportunity to buy and hold for many more years, especially for growth investors or those looking for deep exposure to AI applications.

Could Investing in Quantum Computing Make You a Millionaire? The Answer Might Surprise You. | The Motley Fool

Quantum computing stocks are soaring higher, thereby tempting investors to chase a potential million-dollar opportunity. About 10 years ago, I was in my early 20s and wanted to learn as much as I could about investing. Conveniently, a library down the street from my apartment hosted a weekly meetup on Saturday mornings where people could drop in and talk about their portfolios. I have a vivid memory from one of these meetings during which multiple members of the stock club started touting the potential of blockchain technology. For reference, this period coincided with alternative investments such as crypto (mostly Bitcoin) starting to break onto the scene. My takeaway from this particular meeting was that many of the investors in our group enjoyed hyping blockchain and crypto, but essentially nobody could actually talk about these things in detail. This was my first time experiencing how psychology can affect the way people make investment decisions. While connecting dots that aren't necessarily there isn't anything new, I tend to caution investors from following this style of investing. At the moment, one pocket of the artificial intelligence (AI) realm that is experiencing a lot of momentum is quantum computing. Below, I'm going to explain in detail what is going on in the world of quantum computing. From there, I hope you'll have a better idea of whether or not this is the next millionaire-maker opportunity in AI. The chart below illustrates stock price movements for a number of quantum computing businesses. It's startling how similar the trends are among this cohort of four companies. For months, all of them were penny stocks -- only to witness outsize price increases toward the end of 2024, and more recently, sharp declines. Personally, when I see synchronicity of this magnitude I tend to think that the volatility is coordinated. In other words, I don't buy into the idea that four quantum computing penny stocks all achieved notable milestones around the same time, thereby leading to increased buying activity. Rather, I think sophisticated investors took note of the rising enthusiasm surrounding the idea of quantum computing and decided to take some large positions in speculative opportunities. As I often express, I think investing in momentum stocks is usually best avoided. It's nearly impossible to know when the momentum could stop and a stock could come crashing down. In the case of D-Wave, Quantum Computing, IonQ, and Rigetti Computing, comments from Nvidia Jensen Huang hinting that quantum computing technology is still several years away from becoming useful drove the recent sell-off. As the chart above illustrates, the majority of people who actually made considerable profits investing in these quantum computing stocks were day traders and short-sellers. Neither one of these methodologies is considered prudent for most investors. As surprising as it may sound, I think investing directly into quantum computing stocks is not the way to play this opportunity. Rather, I would suggest looking to big tech companies such as IBM, Microsoft, Alphabet, or any number of chip stocks such as Nvidia, Advanced Micro Devices, or Micron Technology. IBM, Microsoft, and Alphabet are all exploring ways in which quantum computing can augment their respective AI endeavors. However, none of these companies is dependent on quantum computing to shape their long-term potential. To me, all of these big tech and chip stocks have the potential to make you a millionaire, but quantum computing is only one opportunity in a long line of AI-driven tailwinds each of these companies has. By taking positions in more diversified businesses, you inherently gain exposure to many different pockets of the AI landscape and are not as exposed or vulnerable to just one opportunity.