On Thursday, Californian supplier of commercial quantum computers, D Wave Quantum (NYSE:QBTS), announced the sale of its top-end system to German Jülich Unified Infrastructure for Quantum computing. JUNIQ is the first high-performance computing (HPC) center to make such an investment, which will be integrated into Europe’s first exascale supercomputer called JUPITER.
“With D-Wave’s innovative technology, the integration of the system into JUNIQ and its future coupling with the exascale supercomputer JUPITER, we will take the use of quantum technology in Jülich, and on behalf of Germany and Europe, to a new level,”
Prof. Kristel Michielsen, head of JUNIQ & Quantum Computing at Jülich Supercomputing Centre (JSC)
For quantum computing stock investors, this is a big deal as it suggests the first step towards scaling. Over one year, the passively managed Defiance Quantum ETF (NASDAQ:QTUM), holding a broad spectrum of over 70 quantum and semiconductor-related stocks, tracked 46.78% performance.
However, D-Wave Quantum, having 2.16% weight within the ETF, gave shareholders 255% return on its own in the same period. Over the last month, QBTS stock is again on the rise, having outperformed QTUM ETF at 43% vs 8% respectively, now priced at $6.53 per share.
But is quantum computing more hype than substance for long-term value investors? Let’s dive deeper into the deal between D-Wave and Jülich to find out.
What Does Quantum Computing Bring to the Table?
Quantum computing represents a shift from deterministic to probabilistic computing, in which simultaneous parallel processing of 2n states becomes possible. In other words, a classic computer would have to process a function for each possible 2n state sequentially, while a quantum computer can run them at the same time.
But, because of its probabilistic nature, the output is more of a distribution of possible outcomes. In turn, algorithms have to be deployed to extract meaningful information from that distribution. Or to put it differently, quantum computers use quantum interference to suppress incorrect outputs and amplify the correct ones.
Consequently, on a practical level, quantum computing companies like D-Wave have to solve the massive problem of coherence in such a probabilistic system. Case in point, in 2023 this academic paper determined the longest qubit coherence at 1.48 ms. If this is the window before decoherence occurs, quantum computing is inherently for short-computation uses.
The necessary quantum error correction (QEC) further eats away that tiny window, delegating QC to small-scale quantum simulations in cryptography or material science. In other words, the fundamental challenge of qubit destabilization due to environmental interactions (decoherence) places quantum computing in a complementary role, plugged into larger deterministic systems.
Does D-Wave Have a Quantum Breakthrough?
D-Wave’s system (Advantage 2) acquired by JUNIQ offers 5,000 qubits computing power. This is a substantial increase from Rigetti’s latest 84-qubit Ankaa-3. For scaling purposes, D-Wave’s 15-way to 20-way connectivity also has a more robust baseline to correct for errors, which QEC requires.
Moreover, D-Wave’s quantum annealing approach is distinct from Rigetti’s discrete gate-based superconducting qubits. While annealing leverages lowest energy states, making it more suitable for optimization tasks, Rigetti’s approach is heading into greater versatility by plugging into classic computers.
For example, portfolio optimization would be better suited for D-Wave’s quantum computer because annealing itself is suited for quadratic unconstrained binary optimization (QUBO) problems.
Rigetti’s approach still has much maturing to do, as a universal QC approach for general-purpose computing that relies more on error correction and high-fidelity qubits.
In contrast, D-Wave’s quantum annealing is suited for good-enough, approximate solutions given its higher error sensitivity. Therefore, it’s not that D-Wave has a major quantum breakthrough, but its annealing approach developed the farthest for combinatorial optimization use-cases, making it a prime pick for Europe’s supercomputing center.
“Our strategic decision to focus development efforts on enhancing the connectivity and coherence of our next annealing quantum computing system has proven successful,”
Trevor Lanting, chief development officer at D-Wave Quantum
Nonetheless, Advantage 2 represents a major performance improvement, with doubled qubit coherence time and 5x better performance on problems that need a high degree of precision. So far, D-Wave seems to be the go-to solution for quantum-powered applications, having found itself across the board, from Mastercard (NYSE:MA) and Deloitte to Lockheed Martin (NYSE:LMT) and Los Alamos National Laboratory.
The Bottom Line
Although quantum computing has fundamental problems, noted as such in early January by Nvidia (NASDAQ:NVDA) CEO, even its incipient stage holds enough potential to be widely considered for use. However, those use cases are likely to remain at top-level research centers and corporate R&D divisions tackling specific problems.
As such, it is exceedingly unlikely that quantum computing companies will ever churn out systems at scale like Intel (NASDAQ:INTC). Rather, this field should be understood as one of quantum prestige, one that is derived from solving problems intractable for classic computers.
In the meantime, hyperscalers like IBM (NYSE:IBM), Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) are offering cloud-based quantum computing services for experimentation and problem-solving. As it happened with AI, Nvidia has been the main beneficiary of that AI data center growth. D-Wave seems to be on the same track as a commercial quantum computer supplier, but at a much smaller scale.
Yet, at this still early stage, one should not dismiss Rigetti Computing (NASDAQ:RGTI), IONQ (NYSE:IONQ) and other quantum companies. When it comes to D-Wave, the average QBTS price target is $7.33, close to its current level of $6.53, according to WSJ. However, if more adoptions of Advantage 2 pop up in the news, one shouldn’t be surprised to see QBTS stock go up as high as $9 per share.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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