Quantum Computing Stocks Down But Not Out

Bitcoin has a bullish chart with a recent buy signal based on my chart bunching approach. Signals are not guaranteed to work, at least in the short term, but, based on history, the odds are favourable.

If we assume, as I am sure Michael Saylor at bitcoin investor, Microstrategy does, that bitcoin is ultimately headed for $1m plus, then all these buy signals should work well.

Lively Debate About Prospects For Quantum Computing

Quantum computing could generate between $450bn and $850bn in economic value, making it potentially worth more than the current GDP of many countries.

I’ve seen plenty of innovations come and go. But one emerging field has me genuinely excited: the fusion of quantum computing and artificial intelligence.

Quantum computing harnesses quantum mechanics to process information in ways that leave classical computers in the dust. Instead of using traditional bits, quantum computers use quantum bits, or “qubits,” that can exist in multiple states simultaneously (superposition) and be interconnected regardless of distance (entanglement).

Such properties enable quantum computers to perform certain types of calculations exponentially faster, potentially solving problems in seconds that would take their traditional counterparts months or even years. This makes them ideal for tasks like breaking encryption, simulating complex molecular interactions or optimizing large-scale systems.

Now, let’s talk about harnessing this immense computational power for AI, because this is where things get exciting. The marriage of quantum computing and AI gives birth to quantum machine learning (QML), a field that supercharges AI capabilities with quantum speed and problem-solving. QML leverages quantum phenomena to process and analyse data simultaneously on multiple levels, in ways impossible for classical computers. In practice, this fusion of quantum and AI could lead to AI systems capable of making more accurate predictions, gaining deeper insights and solving complex optimization problems across multiple fields.

The potential applications of quantum-enhanced AI are vast and varied. Quantum computers could simulate molecular interactions with unprecedented accuracy, potentially slashing the time and cost of developing new drugs and treatments. They could also help design new materials with specific properties like lightweight, superstrong alloys for aerospace applications or energy storage.

Financial institutions are already exploring how quantum computing could revolutionise their operations. From optimising investment portfolios to developing more sophisticated risk models, the potential for quantum AI to crunch vast amounts of financial data and uncover hidden patterns is immense. We could see more accurate market predictions, better fraud-detection systems and novel approaches to algorithmic trading.

With such groundbreaking potential, it’s no surprise that quantum computing is attracting significant attention and investment. Let’s talk numbers, because they’re rather eye-opening. The global quantum-computing market, valued at $885.4m in 2023, is projected to hit $12.6bn by 2032. Furthermore, a 2024 report by Boston Consulting Group predicts that by 2040, quantum computing could generate between $450bn and $850bn in economic value, making it potentially worth more than the current GDP of many countries.

It’s no wonder then that sectors from pharmaceuticals to finance are keen to get in on the quantum action, and tech giants are more than willing to lend a hand. IBM (IBM) is democratising access to quantum computing through cloud services, allowing researchers and businesses to experiment with quantum algorithms without needing to build their own quantum hardware. Microsoft (MSFT) is pushing forward with its Azure Quantum platform to create a comprehensive ecosystem for quantum development. Intel (INTC) is focusing on scalable quantum processors in order to create chips with thousands or even millions of qubits. Amazon (AMZN) is offering quantum-as-a-service through Amazon Braket, a platform for researchers to test and refine quantum algorithms on a variety of quantum hardware.

But it’s not just the big players. Startups including D-Wave Quantum (QBTS), Rigetti Computing (RGTI) and IonQ (IONQ) are pioneering new approaches to quantum hardware. These and other quantum-computing stocks have been hit hard recently after critical remarks from Nvidia (NVDA) Chief Executive Jensen Huang and Meta Platforms (META) CEO Mark Zuckerberg. But I wouldn’t be surprised if some of these innovative startups become prime acquisition targets for larger firms looking to beef up their quantum-computing capabilities.

Currently, the focus is on improving qubit fidelity – essentially, making quantum operations more accurate and stable. It’s a crucial step toward the true quantum advantage in practical applications. Experts predict significant improvements in qubit quality by 2025, which could pave the way for more reliable quantum systems. This is a critical milestone because quantum computers are currently prone to errors due to the delicate nature of quantum states. Improving qubit fidelity will enable longer and more complex quantum computations and open new possibilities for quantum AI applications.

Interestingly, AI plays a role in quantum systems’ optimisation: Machine learning is helping to improve error correction, reduce noise and optimize quantum algorithms. The synergy between AI and quantum computing is accelerating the development of fault-tolerant quantum computers, which we might see as early as 2030.

Quantum computing will make waves across myriad fields – from drug discovery and financial risk analysis to materials science and even specialised areas like protein-folding simulations, traffic-flow optimisation, artificial photosynthesis and quantum chemistry.

One particularly exciting area of development is problem optimisation. Many real-world challenges, from supply-chain management to network design, involve filtering through a vast number of possibilities to find the best solution. Standard computers often struggle with these problems as the number of variables increases. Quantum computers can explore multiple solutions simultaneously and potentially find optimal or near-optimal solutions much faster than their classical counterparts. This could lead to more efficient logistics, better resource allocation and smarter urban planning, among other applications.

The marriage of quantum computing and AI isn’t just another tech trend – it’s a seismic shift that will drive the next wave of innovations, reshape industries and open new possibilities for tackling some of the world’s most complex challenges. At this point, we’re still in the early stages of this technology. Today’s quantum computers are powerful research tools that push the boundaries of what’s possible, but there’s much work to be done before they’re ready for widespread, real-world applications.

Market Watch, 16 January 2025

Despite my caution about prospects for bond yields and the possibility of a major political upheaval in the UK growth shares in the US look as robust as ever, as the technology revolution rolls on at an ever-accelerating pace. There are plenty of shares with excellent prospects.

Constellation Energy Leads US Shift To Nuclear Power

It’s been an incredible three years for Constellation, a remarkable journey that perhaps is best epitomised by the restart of the Crane Clean Energy Centre that we announced in September. Crane validates 3 points that we have discussed many times before. First, it’s a powerful symbol of the rebirth of nuclear energy. And it happens at a location that once came to represent nuclear energy’s demise.

Second, it confirms our thesis that the most valuable energy commodity in the world today is clean and reliable electricity. And third, it underscores the growing demand for 24/7 clean energy, driven by the data economy, onshoring, and electrification. All of these macro points benefit our owners. We have talked about them before, and I don’t think we need to talk about it much more because by now, these points have become self-evident.

In addition to Crane, we have at least 1,000 megawatts of additional nuclear generation that we could bring on to the grid through uprates. And I’m pleased to report to you that we are seeing a wave of interest from customers who are interested in these opportunities and in our relicensing, and we are making significant progress on contracting. The intensity of our negotiations with hyperscalers and others keeps going up and up. Our entire team is focused on executing transactions and supporting data center development anywhere in PJM*.

The 13pc compounded growth that we’ve committed to you through the end of the decade is secure and we’re very confident that we will outperform this target as we layer in new opportunities, just as you have seen us continuously outperform quarter to quarter and year to year. Turning to Slide 6. Nuclear performance was once again strong. We produced more than 41m megawatt hours of a reliable, available, and carbon-free generation from our nuclear plants with a capacity factor of 95pc.

Joseph Dominguez, Constellation Energy, Q3 2024, 4 November 2024

*PJM Interconnection LLC (PJM) is a regional transmission organization (RTO) in the United States. It is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North. Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia.

PJM, headquartered in Valley Forge, Pennsylvania, was the world’s largest competitive wholesale electricity market until the development of the European Integrated Energy Market in the 2000s.^[4] More than 1,000 companies are members of PJM, which serves 65m people and has 185 gigawatts of generating capacity. With 1,436 electric power generators and 85,103 miles of transmission lines, PJM delivered 783 terawatt-hours of electricity in 2021.^[5]

Started in 1927, the pool was renamed the Pennsylvania-New Jersey-Maryland Interconnection (PJM) in 1956. The organisation continues to integrate additional utility transmission systems into its operations.

The Federal Energy Regulatory Commission (FERC) regulates PJM^[6] and approves its open-access transmission tariff for the wholesale electricity market.

Carpenter Technology, A Global Leader In High-Performance Specialty Alloy Materials

“Carpenter Technology continues to exceed performance and outlook expectations. Having just completed a historic fiscal year 2024 and a strong start with our first quarter results, we are well positioned to achieve our accelerated goals and believe our earnings growth journey will extend far beyond fiscal year 2025.”

Carpenter Technology, Q1 2025, 24 October 2024

Intuitive Surgical Launches Da Vinci 5 To Great Enthusiasm

We’re still relatively early in our opportunity to localise our capabilities to serve more patients around the world. Overall, our teams have been strengthening our ability to serve our customers globally at industrial scale, expanding the applicability of robot-assisted surgery and other interventions by pursuing new platforms, products, and services and obtaining new clinical indications. We’ve also been strengthening our digital ecosystem to support our customers and our company with high-quality data and insight. The opportunity to improve outcomes for patients and our customers’ quintuple aim through advanced technology ecosystems like ours is bigger than ever, and we are focused on disciplined execution to get there.

Gary Guthart, CEO, Intuitive Surgical, Q3 2024, 17 October 2024

Palantir Shares Consolidate After Spectacular 2024

This is still only the beginning.

Letter to shareholders, Palantir Technologies, Q3 2024, 4 November 2024

All indicators point to Palantir remaining at the forefront of the AI transformation impacting industries worldwide. The company has had remarkable success with AI-driven workflows and world-class analytics. This has allowed it to secure deals with both government and commercial clients. If anything, Palantir only appears to be accelerating it’s move into AI, which will likely translate into even more growth moving forward. At its current valuation of $153bn Palantir has an incredibly high forward P/E ratio and PEG ratio of 176 and ~5 respectively. Despite this, Palantir is still a worthy investment given its increasingly dominant foothold in high-growth markets.

Seeking Alpha, 17 January 2025

Nvidia Ready For Next Leap Forward

We continue to deliver incredible growth.

Total revenue is expected to be $37.5bn, plus or minus 2pc, which incorporates continued demand for Hopper architecture and the initial ramp of our Blackwell products. While demand greatly exceeds supply, we are on track to exceed our previous Blackwell revenue estimate of several billion dollars as our visibility into supply continues to increase.

Colette Kress, CFO, Nvidia, Q3 2025, 20 November 2024

“AI will be mainstream in every application for every industry. With Project DIGITS, the Grace Blackwell Superchip comes to millions of developers,” said Jensen Huang, founder and CEO of NVIDIA. “Placing an AI supercomputer on the desks of every data scientist, AI researcher and student empowers them to engage and shape the age of AI.”

Nvidia news, 6 January 2025

Broadcom Grows AI Revenue By 220pc

There were two significant drivers of this transformation this year.

First, we closed the acquisition of VMware in the early weeks of fiscal ’24 and then focused VMware on its technology leadership in data centre virtualisation. The integration of VMware is largely complete. Revenue is on a growth trajectory and operating margin reached 70pc exiting 2024. We are well on the path to delivering incremental adjusted EBITDA at a level that significantly exceeds the $8.5bn we communicated when we announced the deal.

The second driver in 2024 was AI. Our AI revenue, which came from strength in custom AI accelerators or XPUs and networking, grew 220pc from $3.8bn in fiscal 2023 to $12.2bn in fiscal 2024 and represented 41pc of a semiconductor revenue. This drove semiconductor revenue up to a record $30.1bn during the year.

As you know, we currently have three hyper-scale customers who have developed their own multi-generational AI XPU road map to be deployed at varying rates over the next three years. [An XPU roadmap is a plan for combining different types of silicon into a single package to create a compute architecture that’s best suited for a specific application. The “X” in XPU stands for “any compute architecture”.] In 2027, we believe each of them plans to deploy one million XPU clusters across a single fabric. We expect this to represent an AI revenue serviceable addressable market, or SAM, for XPUs and network in the range of $60bn to $90bn in fiscal 2027 alone. We are very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2bn.

Hok Tan, CEO, Broadcom, Q4 2024, 12 December 2024

Taiwan Semiconductor Plans Dramatic Increase In Investment

At TSMC, a higher level of capital expenditures is always correlated with higher growth opportunities in the following years. In 2024, we spent USD 29.8bn as we continue to invest to support our customers’ growth. With our strong technology leadership and differentiation, we are well-positioned to capture the multiyear structured demand from the industry megatrends of 5G, AI, and HPC. In 2025, we expect our capital budget to be between USD 38bn and USD 42bn as we invest to capture the future growth.

Wendell Huang, CFO, Taiwan Semiconcudctor Manufacturing, Q4 2024, 16 January 2025

Spotify Sees Thrilling Effects Of AI

We will close out Q4 just as we started the year, laser-focused on monetisation and the underlying fundamentals of our business. Looking at our forecast, we expect to make further progress across all of our key metrics, which sets us up with plenty of runway for growth and profitability expansion in the years to come. But make no mistake, we’re not here to merely optimise for today. I am as energised as I’ve ever been about the current landscape of technology. What’s unfolding in AI with all of its knock-on effects is both thrilling and humbling. Moments like this don’t come often. They’re inflection points where you can either let the opportunity slip by or you can seize it and press forward with conviction. We’re choosing the latter, fully committed, heads down and building for a future full of possibility.

Daniel Ek, CEO, Spotify, Q3 2024, 12 November 2024

Godaddy’s Airo Provides Magical Experience

We are excited with the progress on the conversational bot [A bot is a software program that performs tasks automatically, often repetitive tasks that humans would normally do.] and along with GABI [Guide Assisted Bot], we expect these to continue to drive leverage in care while delivering a better experience globally. And Airo [GoDaddy Airo is a set of AI-powered tools that help small businesses establish an online presence and grow their business] is starting to provide a magical experience to customers that we aspire to provide across every interaction. It is a compelling proof point to our multiple year journey to successfully leverage our software platform and unleash the combined power of our infrastructure, large-scale data, experimentation, AI and machine learning capabilities.

Aman Bhutani, CEO, GoDaddy, Q3 2024, 30 October 2024

Credo Technology Sees Inflection Point

For several quarters, we’ve anticipated an inflection point in our revenues during the second half of fiscal ’25. I’m pleased to share that this turning point has arrived, and we are seeing even greater momentum than initially projected.

Bill Brennan, CEO, Credo Technology, Q2 2025, 2 December 2024

CyberArk Software Poised For Stellar Next Phase

Identity security is a clear and present need for CISOs [chief information security officers] and our solution selling has further aligned how we see how the customer wants to buy, and this is resonating with customers. Our vision to deliver the right level of privileged controls to every identity, human and machine, is expanding our competitive moat and leadership position in identity security. With Venafi, we’re setting a new standard for end-to-end machine identity security. And finally, with our strong execution and unique platform, we are well positioned to deliver a stellar next phase of durable profitable growth and take CyberArk to the next level.

Matt Cohen, CEO, Cyberark Software, Q3 2024, 13 November 2024

Microstrategy holds over $45bn worth of Bitcoin and is increasing its position rapidly. The company is valued at around double its bitcoin holdings. I have no idea if this is the right valuation but the chart is consolidating promisingly. The company’s aggressive bitcoin purchases reflect chairman, Michael Saylor’s belief, that much higher prices lie ahead – $1m here we come!

Applovin’s Software Business Surges 66pc

We had another fantastic quarter in Q3. Our AXON models continue to improve through selflearning and, more importantly this quarter, from technology enhancements by our engineering team. As we continue to improve our models our advertising partners are able to successfully spend at a greater scale. We’re proud to be a catalyst to reinvigorating growth in our industry.

Our Software Platform segment continued to grow in the third quarter, with Software Platform revenue of $835m, up 66pc year-over-year, driven by continued development of our AXON engine through ongoing self-learning and directed model enhancements. These technology enhancements allowed our advertising partners to further increase the scale of their spend on our platform while consistently achieving their return on ad spend (“ROAS”) goals.

Applovin shareholders letter, Q3 2024, 6 November 2024

Arista Networks Dominates Networking For AI

We believe that networks are emerging at the epicenter of mission-critical transactions, and our Arista 2.0 strategy is resonating well with customers. We are, we believe, the only pure-play network innovator for the next decade. Our modern networking platforms are foundational for transformation from silos to centers of data. This can be a data centre, a campus centre, a WAN center, or an AI centre.

At the heart of this is our state-oriented publish-subscribe network data lake EOS software stack for multi-modal data sets. One simply cannot learn without having access to all this data. So, it is all about the data. We provide customers the state foundation for data for AI and machine learning, without which AI and ML would just be buzzwords.

Jayshree Ullal, CEO, Arista Networks, Q3 2024, 7 November 2024

Share Recommendations (18 January 2025)

Bitcoin BTCUSD

IonQ. IONQ

Rigetti Computing. RGTI

Constellation Energy. CEG

Carpenter Technology. CRS

Intuitive Surgical. ISRG

Palantir Technology. PLTR

Nvidia. NVDA

Broadcom AVGO

Taiwan Semiconductor Manufacturing. TSM

Spotify. SPOT

Godaddy. GDDY

Credo Technology. CRDO

CyberArk Software. CYBR

Microstrategy. MSTR

Applovin APP

Arista Networks. ANET

Strategy – Bonds Wobble But Shares Are OK

Many governments are borrowing on a scale undreamed by their more cautious predecessors. This is pressing bond yields to stay high and disenchanting electorates who see minimal benefit from all this borrowing and spending.

Shares, especially those in exciting growth shares where much of the return lies in the future, don’t like high bond yields which force up discount rates [growth shares are valued by discounting expected future earnings to the present day]. But fortunately for investors, there is something much bigger going on.

The world is in the grip of an accelerating and increasingly all-changing technology revolution driven by a generation of super entrepreneurs. The Renaissance was all about a handful of city-states in Italy and the geniuses who flourished there. For 16th century Italy read the west coast of America and the super-entrepreneurs whose genius is driving the technology revolution.

The selection of shares above gives the flavour of what is happening. Invest in these and others like them, and fortunes will be made. Technology is changing the face of war, industrial production, how we find and generate energy, transport, health and medicine, entertainment and so much more. It is an exhilarating time.