Want to Invest in Quantum Computing? 4 Stocks That Are Great Buys Right Now

The article discusses investment strategies in the emerging quantum computing sector, highlighting the trade-offs between established tech giants like Alphabet and Microsoft, which offer stability and resources, and pure-play startups like IonQ and D-Wave, which offer higher potential returns but also greater risk. It suggests a balanced approach, recommending a portfolio including both types of companies to capitalize on the sector's growth while mitigating risk, specifically mentioning Alphabet, Microsoft, IonQ, and D-Wave.

Analysis

The quantum computing sector presents a dichotomous investment landscape, pitting established technology behemoths against specialized startups. Companies like Alphabet (GOOG, GOOGL) and Microsoft (MSFT) offer significant financial muscle, with last quarter free cash flows of approximately $19 billion and $20 billion respectively, allowing substantial investment in quantum research without jeopardizing their core businesses. This inherent diversification makes them safer, albeit potentially lower-upside, bets on quantum computing's success. Conversely, pure-play quantum firms such as IonQ (IONQ) and D-Wave (QBTS) represent higher-risk, higher-reward opportunities. IonQ's funding relies on contracts, notably with the Air Force Research Lab, while D-Wave is transitioning towards self-funding through initial sales of its quantum computing systems. Success for these startups could yield explosive stock returns, but they face considerable volatility. The article advocates for a diversified "basket approach," suggesting investments across both large-cap tech and quantum startups—specifically Alphabet, Microsoft, IonQ, and D-Wave—to balance risk while maintaining exposure to potential breakthroughs. Notably, while discussing IonQ, the article points out it was not among a recent top 10 list from The Motley Fool Stock Advisor, contrasting this with past successful recommendations like Netflix and Nvidia.

Key Decisions for Investors

• Investors should consider a diversified portfolio approach to the quantum computing sector, balancing positions in financially robust tech giants like Alphabet and Microsoft with speculative, high-growth potential pure-play startups such as IonQ and D-Wave.
• Monitor the commercial traction of pure-play quantum companies, particularly D-Wave's system sales, as an early indicator of the technology's market viability and potential for self-sustaining growth in the sector.
• Exercise caution and conduct thorough due diligence on individual quantum startups like IonQ, acknowledging their inherent volatility and specific analyst observations, such as its absence from a recent 'top 10 best stocks' list, despite its potential long-term upside.