Quantum computing offers the potential to harness big data, make intricate predictions and use artificial intelligence (AI) to revolutionize business operations. Many industries such as automotive, agriculture, finance, healthcare, energy, logistics and space will be affected from the growth in this technology. As a result, Wall Street has been paying significant attention to quantum computing stocks.
Once considered science fiction, quantum computing has made significant progress in recent years to solve complex problems at lightning speed. This advanced technology uses the power of quantum mechanics to represent complex problems. These computers can take seconds to calculate equations that normally take days for machines that use a binary framework.
International Data Corporation forecasts that the global market for quantum computing should grow from about $412 million in 2020 to more than $8.5 billion in 2027. This increase would mean a compound annual growth rate (CAGR) of an eye-popping 50% between now and 2027. Given such metrics, it’s understandable why investors are thrilled about the future of quantum computing stocks.
While it is currently in its early days, Wall Street has already warmed up to long-term prospects of this technology. Besides several pure-play quantum computing stocks going public in 2021, well-known tech names are pouring significant research dollars to invest in this advanced segment.
With that information, here are the seven best quantum computing stocks to buy in 2022:
- Analog Devices (NASDAQ:ADI)
- Defiance Quantum ETF (NYSEARCA:QTUM)
- International Business Machines (NYSE:IBM)
- IonQ (NYSE:IONQ)
- Microsoft (NASDAQ:MSFT)
- Nvidia (NASDAQ:NVDA)
- Supernova Partners Acquisition II (NYSE:SNII)
Quantum Computing Stocks: Analog Devices (ADI)
52-week range: $142.25 – $191.95
Dividend yield: 1.7%
Semiconductor group Analog Devices manufactures integrated circuits that process analog and digital signals. ADI’s chips are used in data converters, high-performance amplifiers and microwave-integrated circuits.
Analog Devices issued Q4 2021 metrics on Nov. 23. Revenue increased 53% year-over-year (YOY) to $2.34 billion. Adjusted earnings soared from $1.44 per share to $1.73 per share. The company generated a free cash flow of $810 million. Cash and equivalents ended the period at $1.98 billion.
Factory automation has fueled demand for sensors and machine connectivity, which increasingly rely on Analog’s chips. In addition, the automotive industry has also become a key growth driver due to the rising use of advanced electronics in electric vehicles (EVs).
In late August, the chipmaker completed the acquisition of Maxim Integrated. The billion transaction should increase ADI’s market share in automotive and 5G chipmaking.
ADI currently trades just under $160, up 7% over the past 12 months. Shares are trading at 21.5 times forward earnings and 8.9 times trailing sales. The 12-month median price forecast for Analog Devices stock stands at $210.
Defiance Quantum ETF (QTUM)
52-Week Range: $42.96 – $57.15
Expense Ratio: 0.40% per year
QTUM is an exchange-traded fund (ETF) that focuses on the next generation of computing. It offers exposure to names leading the way in quantum computing, machine learning and cloud computing. The fund tracks the BlueStar Quantum Computing and Machine Learning Index.
QTUM, which started trading in September 2018, has 71 holdings. The top 10 holdings account for less than 20% of net assets of $161.5 million. Put another way, fund managers are not taking major bets on any company.
For most retail investors, QTUM could potentially be a safe and diversified place to start investing in quantum computing. As portfolio companies come from a wide range of technology segments, wide swings in the price of one stock will not affect the ETF significantly.
The fund has gained 8.7% over the past year and saw an all-time high in November 2021. However, the recent selloff in tech stocks led to a 10.7% decline year-to-date (YTD). Interested readers could regard this decline as a good entry point into QTUM.
Quantum Computing Stocks: International Business Machines (IBM)
52-week range: $113.17 – $146.12
Dividend Yield: 4.8%
Technology giant International Business Machines (IBM) needs little introduction. The legacy tech name offers integrated solutions and services, including infrastructure, software, information technology (IT) and hardware.
IBM announced Q4 2021 financials on Jan. 24. The company generated revenues of $16.7 billion, up 6.5% YOY. Net income stood at $2.33 billion, or $2.57 per diluted share, up from $1.36 billion, or $1.51 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $6.65 billion.
After the announcement, CEO Arvind Krishna said, “We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in
software and consulting.”
The company launched its Quantum System One quantum computer in 2019. Around 150 research groups and partner companies currently use IBM’s quantum computing services. These names come from financial services businesses, automakers and energy suppliers.
In June 2021, IBM unveiled Europe’s most powerful quantum computer in Germany. Moreover, the tech giant recently announced a deal with Raytheon Technologies (NYSE:RTX) to provide quantum computing and AI services for the aerospace, defense and intelligence industries.
IBM currently changes hands around $137, up 20% over the past 12 months. Shares are trading at 13.5 times forward earnings and 2.2 times trailing sales. The 12-month median price forecast for IBM stock is $144.50. Interested readers could consider buying IBM shares around these levels.
52-week range: $7.07 – $35.90
IonQ is one of the first publicly traded pure-play quantum computing stocks. It went public via a merger with the special purpose acquisition company (SPAC) dMY Technology Group III in late 2021.
The quantum name released Q3 2021 results on Nov. 15. Its net loss was $14.8 million, or 12 cents loss per diluted share, compared to a net loss of $3.6 million a year ago. Cash and equivalents ended the quarter at $587 million. Wall Street was pleased that at the time, YTD contract bookings came in at $15.1 million.
IonQ is currently developing a network of quantum computers accessible from various cloud services. The technology uses ionized atoms that allow IonQ’s machines to perform complex calculations with fewer errors than any other quantum computer available.
The start-up has the financial backing of prominent investors, including Bill Gates and the Japanese telecommunications company Softbank Group (OTCMKTS:SFTBF). In addition, IonQ has been developing strategic partnerships with Microsoft, Amazon’s (NASDAQ:AMZN) Amazon Web Services and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud.
While IonQ is taking steps to become a commercialization-stage name, it is still a speculative investment. With its potential for explosive growth, it could be an attractive quantum computing stock for investors looking to take a risk.
IONQ stock hovers around $12. The recent selloff in tech stocks has led to a 26.7% decline YTD. Yet, the 12-month median price forecast for IONQ stock stands at $23.
Quantum Computing Stocks: Microsoft (MSFT)
52-week range: $224.26 – $349.67
Dividend Yield: 0.8%
Microsoft is one the largest and most prominent technology firms worldwide. It offers software products and services, including Azure cloud service, the Office 365 productivity suite and the customer relationship management (CRM) platform Dynamics 365.
Meanwhile, the Microsoft Quantum is “the world’s first full-stack, open cloud quantum computing ecosystem” that allows developers to create quantum applications and run them on multiple platforms. The software giant provides quantum computing services via the cloud on Azure.
Management announced robust Q2 FY22 metrics on Jan. 25. Revenue increased 20% YOY to $51.7 billion. Net income surged 21% YOY to $18.8 billion, or $2.48 per diluted share, compared to $15.5 billion, or $2.03 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $20.6 billion.
On Jan. 18, Microsoft announced plans to acquire Activision Blizzard (NASDAQ:ATVI), a leading player in game and interactive entertainment development. It will be an all-cash transaction valued at $68.7 billion. Wall Street expects this deal to provide tailwinds for Microsoft’s gaming business and building blocks for the metaverse.
MSFT stock currently trades just under $310, up 27% over the past 12 months. Shares support a valuation of 32.6 times forward earnings and 12.3 times trailing sales. And the 12-month median price forecast for Microsoft stock stands at $370.
52-week range: $115.67 – $346.47
Dividend Yield: 0.06%
Santa Clara, California-based Nvidia has become an important name in advanced semiconductor design and software for next-generation computing development. InvestorPlace readers likely know the chipmaker is a market leader in the gaming and data center markets.
Nvidia announced impressive Q3 FY 2022 numbers on Nov. 17. Revenue soared 50% YOY to a record $7.1 billion, fueled by record sales in the gaming and data center businesses. Net income increased 62% YOY to $2.97 billion, or $1.17 per diluted share. Cash and equivalents ended the period at $1.29 billion.
The chipmaker provides the necessary processing power that drives the development of quantum computing. Additionally, Nvidia recently released cuQuantum, a software development kit designed for building quantum computing workflows. It has partnered with Google, IBM and other quantum computing players that rely on cuQuantum to accelerate their quantum computing work.
Given its growing addressable market in cloud computing, gaming, AI, and more recently the metaverse, NVDA stock deserves your attention. Share are changing hands around $245, up nearly 80% over the past year. However, despite an 18% decline YTD, shares are trading at 46.5 times forward earnings and 25 times trailing sales.
Finally, the 12-month median price forecast for Nvidia stock is $350. As the company gets ready to report earnings soon, investors should expect increased choppiness in price.
Quantum Computing Stocks: Supernova Partners Acquisition II (SNII)
52-week range: $9.62 – $12.75
Our final stock is Supernova Partners Acquisition II, a SPAC. It is merging with Rigetti Computing, a start-up focused on quantum computer development. As a result of the merger, Rigetti Computing was valued at about $1.5 billion and received $458 million in gross cash proceeds.
Rigetti designs quantum chips and then integrates those chips with a controlling architecture. It also develops software used to build algorithms for these chips.
Rigetti recently announced business highlights for the nine months ended Oct. 31, 2021. Revenue came in at $6.9 million. Net operating loss declined 3% YOY to $26.2 million.
“We believe the time for quantum computing has arrived,” said founder and CEO Chad Rigetti. “Customer demand is increasing as Rigetti quantum computers begin to address high-impact computational problems.”
The start-up launched the world’s first scalable multi-chip quantum processor in June 2021. This processor boasts a proprietary modular architecture. Now Wall Street expects the company to move toward commercialization.
Rigetti collaborates with government entities and technology to advance its quantum processors. For instance, it boasts strategic partnerships with the National Aeronautics and Space Administration (NASA) and the U.S. Department of Energy. It also works with data analytics firm Palantir Technologies (NYSE:PLTR) and electronics manufacturer Keysight Technologies (NYSE:KEYS).
SNII stock is currently shy of $10, down about 4% YTD. As investors’ interest in quantum computing names grow, shares are likely to become hot.
On the date of publication, Tezcan Gecgil holds both long and short positions in NVDA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.