Quantum computing has suddenly become a buzzword on Wall Street.
Since then Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) reported that it had reached a new milestone with Willow, its new quantum chip, quantum stocks were rising. Willow is said to be able to exponentially reduce errors as it scales up, and performed a standard benchmark calculation in just five minutes that would take one of the world’s fastest supercomputers 10 septillion years today.
The announcement sent Alphabet shares soaring and sent shares of small-cap quantum computing stocks such as D-Wave Quantum (NYSE: QBTS), Quantum computing (NASDAQ: QUBT), Rigetti Computing (NASDAQ: RGTI)and IonQ (NYSE: IONQ) dizzy.
However, in January, those shares fell due to the rejection of several high-profile tech CEOs. First Nvidia CEO Jensen Huang said “very useful” quantum computing is 15 to 30 years away. Just a few days later, Meta platform CEO Mark Zuckerberg echoed those remarks, saying he believed it was “pretty far from being a very useful paradigm.” He also thought that “pretty smart artificial intelligence” would be available before quantum computing became useful. Even the ex Cisco Systems Chief executive John Chambers said quantum computing was the way forward in the “decade of artificial intelligence”.
However, executives at quantum stocks jumped to the defense of the technology and their business.
Image source: Getty Images.
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 quant stocks, but its 2024 guidance calls for just $38 million to $42 million in revenue, even though revenue doubled in the third quarter. With a market capitalization of $9 billion, the stock trades at a price to sales ratio of more than 200, which shows that investors are betting big on the stock.
The potential of quantum computing stocks is debatable, as is the timeline for its destructiveness, but between quantum and artificial intelligence, artificial intelligence is more deserving of your investment dollars.
That technology is already here, growing rapidly 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 (NASDAQ: MU) is best known as a supplier of memory chips, but these days the company is seeing a rise in demand from artificial intelligence, 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 data centers, where revenue jumped more than 400% year-over-year and 40 % sequentially, which management attributed to strong demand for artificial intelligence.
Micron also has a close working relationship with Nvidia, which is believed to be its biggest customer, and whose shares recently rose after Nvidia said it was using its chips in its new Blackwell platform.
Right now, Micron also looks like an attractive opportunity for investors as the stock fell after its recent earnings report due to weak guidance. However, management said it will return to strong growth, which could pave the way for significant gains for the stock. With a forward P/E of 14, the stock looks cheap for its growth potential.
Another AI stock that seems like a must in 2025 is TSMC (NYSE: TSM)or Taiwan Semiconductor Manufacturing.
TSMC is the world’s largest contract chip manufacturer, managing production for Nvidia, Apple, Broadcomand others. This gives TSMC enormous market power, as it has market shares of more than 50% in third-party chip manufacturing and approximately 90% in advanced manufacturing. In many ways, it is the backbone of 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 smaller.
TSMC’s revenue growth was 38%, and its operating margin reached nearly 50% in the quarter.
With AI demand continuing to grow and the ongoing chip sector recovery broadening, TSMC looks set for another strong year in 2025 and beyond.
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Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman holds positions at Broadcom, Meta Platforms, Micron Technology, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Apple, Cisco Systems, Meta Platforms, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
