According to McKinsey, the investments in quantum computing startups have surpassed $1.7 billion in 2021. That is more than double the amount raised in 2020. And guess what the statistics of 2022 will bring?
But what is quantum computing, what are the existing technologies and why should you invest in it? And when is the best timing to join the cause?
Disclaimer: This article does not represent financial advice whatsoever. It only describes the current state of the market.
Why do we need it
Already in the sixties, Gordon Moore observed that computing power was doubling every 18 months. And it continued to do so the last decades, so we called this observation Moore’s law. Increasing computing power is done by increasing the density of transistors on an integrated circuit.
But recently we reached the limit with densities approaching 1 transistor every 10 nm where suddenly the macroscopic laws of physics do not apply anymore. Quantum effects appears and stop us to continue to increase transistor density, hence, to increase computing power.
Is this the end of the computer industry as we know it?
WTF are quantum physics?
Quantum physics is the study of matter and energy at atomic and sub-atomic scale. It was pioneered in the twenties of last century by Bohr, Heisenberg, Pauli, Schrödinger, Dirac and many others. It led to the understanding of the atom and nucleus as we know today and is undoubtedly one of the most successful theories in physics.
The basic idea of quantum physics is that particles are concentrated distributions of energy. That energy exchange between particles happens in quanta, a predetermined volume of interaction energy that can also be interpreted as a particle.
So basically, everything is considered a particle and energy at the same time.
Quantum physics uses advanced mathematics and predicts a bunch of weird stuff that has all been proven to be true in later experiments. One of these weird quantum effects is tunneling, where particles can propagate through barriers. Another effect is superposition, the ability of a quantum system to be in multiple states at the same time until it is measured.
It is quantum tunneling that is responsible for stopping Moore’s law. It is superposition that will be the solution to fix this.
Let the problem be the solution
If quantum physics is stopping us from building faster classical computers, let us use quantum physics to build a new generation of computers.
Classical computers use bits, conceptual one’s and zero’s translated into a physical quantity depending on its use; current/no current, voltage/no voltage, magnetism/no magnetism, etc. Operations on bits are done on one or on zero.
It was the eccentric but genius physicist Richard Feynman in 1982, who first came up with the idea of a quantum computer. His statement: “Nature isn't classical, dammit, and if you want to make a simulation of nature, you'd better make it quantum mechanical,” was later interpreted as the unofficial launch of the development of the quantum computer.
Quantum computers use qubits (a complex superposition of the possible states one and zero) or in layman’s terms a qubit can be a little bit of one and a little bit of zero, all at the same time. Operation on qubits is done on all combinations of one’s and zero’s at the same time.
Therefore, pop-science commonly states that n qubits correspond to 2n classical bits.
Technology needed to build Quantum Computers
The challenge when building a quantum computer is to find a physical phenomenon that perfectly mimics qubits as described by the theoretical framework to produce a Qubit Processing Unit (QPU).
One common implementation of QPU is trapped-ion qubits. Ions (charged atoms) are trapped in an electromagnetic field. The stable electric states of the ion represent the qubits. Lasers are used to excite the ions to change their state and delicate photonic detection systems capture the photons to interpret the results of operations. Honeywell is using this technology to develop their quantum processor.
Superconducting loops is another technology used by IBM and Google in their effort to build a QPU. A small loop of superconducting material is put in a magnetic field that induces current in the loop. Classically, the current can flow clockwise or counterclockwise, but when the loop is small enough both directions can exist quantum mechanically at the same time and hence form a qubit.
D-Wave combines this technology with the slightly controversial quantum annealing, which uses quantum theory to solve an optimization problem. It is often used for machine learning.
The development of a quantum computer does not stop with the development of a QPU. Qubits are very prone to errors due to thermal fluctuations or external electromagnetic fields that influence the intrinsic qubits values. This quantum decoherence must be minimized by using operating temperatures close to the absolute 0, perfect electromagnetic isolation and finally intelligent quantum error correction algorithms.
In classical computing, engineers use logical circuits with NOT, AND, XOR gates etc. to perform calculations. The same is true in quantum computing, but with a far richer zoo of exotic gates; just like the Hadamard gate (no, this is not an episode of the Games of Thrones).
The quantum software stack is very equivalent to the classical one. Quantum compilers transform high-level language to assemble close to the logical circuit operations.
The big difference with classical computing is that quantum computing will be offered as a cloud service or quantum-as-a-service (QAAS). Amazon Bracket, Microsoft Azure Quantum, Rigetti Quantum Cloud are currently the best-know QAAS offerings.
The promise of quantum computing
Enough nerdy geek talk. Let us talk about what we can finally do with these new devices. Many industries today face the limits of classical computing in their problem-solving capacity and are longing for a giant leap forward. Quantum Computers have the potential to resolve problems of a complexity and magnitude that is close to impossible with classical computers.
Industries that will directly benefit from this giant leap are:
- Finance (targeting and prediction, trading optimization, and risk profiling)
- Transportation (autonomous vehicles, traffic simulation and control)
- Chemistry and Pharmacy (synthesis of complex molecules, new drug design)
- Climate simulations and weather forecasts in a precision unthinkable today
- Machine Learning
- Image Analysis
- Cyber Security
- Healthcare (bio informatics, cancer research)
Financing the Industry
So today, we are in a phase where the first quantum computers have been produced and are offering their computing power to who can afford it to solve complex problems that classical computers cannot solve anymore (like cracking conventional encryption).
A booming ecosystem of emerging quantum computing businesses and use cases promise to create significant value for the industry.
The Boston Consulting Group estimates quantum computing to create a total addressable market (TAM) between $450¬–$850 billion in the next 15 to 30 years, from which $5 to $10 billion in the next 3 to 5 years.
This Quantum Computing potential has caught the attention of private equity (PE) investors who now understand the long-term need and believe in the huge business opportunity. Bigger companies in the spotlight, like D-Wave, have found their way to PE, but there is a full spectrum of smaller companies, in hardware, software and services, from which some of them are already profitable.
A good example confirming this market momentum is the creation of Quantum Exponential: “Quantum Exponential is assembling a portfolio of potential investments in leading Quantum technology companies around the world and has a team of experts with unparalleled market knowledge and access so as to establish, maintain and keep developing a global lead in Quantum portfolio management.”
Well-known corporates active in Quantum Computing are also available on the stock market:
- Microsoft Corp. (ticker: MSFT)
- International Business Machines Corp. (IBM)
- Nvidia Corp. (NVDA)
- Alphabet Inc. (GOOG, GOOGL)
- Honeywell International Inc. (HON)
- Amazon.com Inc. (AMZN)
- Intel Corp. (INTC)
- Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
- Alibaba Group Holding Ltd (HKG: 9988)
But today new pure play companies are introduced:
- D-Wave (QBTS)
- IonQ Inc (IONQ)
- Rigetti Computing Inc (RGTI)
- Quantum Computing Inc (QUBT)
- Arquit Quantum Inc. (ARQQ)
And soon we also expect some companies who use QC to push new boundaries to IPO, like some healthcare rising stars:
- Polaris: revolutionization of drug design by joining Quantum Computing with AI and Precision Medicine.
- Auransa: data and AI-driven QC platform capable of ingesting complex human disease data, large and small, and use that data to understand the biology of complex diseases.
The race for the geopolitical quantum advantage?
The country that leads the race in quantum computing development has a huge geopolitical advantage.
Today, our digital economy is based on public/private key cryptography that uses a simple mathematical principle. Given two large prime numbers, it is extremely easy to multiple them, but given a large number as a product of two primes, it is extremely difficult to factor these two prime numbers out.
In 1994, a mathematician called Peter Shor, published an algorithm to factor out prime numbers. This came as a shock for al security services all over the world. The country that could implement Shor’s algorithm, could crack all encrypted information all over the planet. Luckily, one of the steps in this algorithm was so computationally heavy, that it would take a classical computer almost the age of the universe to perform it.
Then came the progress in quantum computing, where Shor’s algorithm was not an interesting mathematical exercise anymore but was becoming a real threat for our digital economy.
During the Cold War, we had the space race, today we have the quantum race.
In 2019, Google announced their 53-qubit Sycamore processor had completed in 3.3 minutes a task that would have taken a classical supercomputer at least 2.5 days. This Google task has been used as a benchmark in the industry to compare computing power.
In May 2021, a team of Chinese physicists lead by Pan Jianwei (aka China’s Einstein) reported a QPU called Zu Chongzhi, they claim is a million times faster than Google’s Sycamore. This is a first result of the 15 bn$ public funding effort in quantum computing, compared to the 7bn$ US and EU combined. And more will follow. The existing funding is spent building research centers, like the one in the Anhui province where they built the Center for Excellence on Quantum Information and Quantum Physics in the share of Einstein’s photon energy equation E = hv. And a complete Quantum Valley is planned for Jinan to be operational by 2025.
So, for now it seems China may have taken the lead in the race for the quantum advantage.
The game is on.