Not so fast, Jensen Huang.
You may remember that the CEO and co-founder of AI chipmaking deity Nvidia (NVDA) caused quite a stir when he shared his somewhat dubious feelings about the future of quantum computing.
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This field of computer science uses quantum mechanics to solve problems that are too difficult for classical computers.
While today’s computers use binary electrical signals to represent ones or zeros, quantum computers employ quantum bits or qubits, which are subatomic particles
“The laws of quantum mechanics allow qubits to encode exponentially more information than bits,” the U.S. Department of Energy said on its website. “By manipulating information stored in these qubits, scientists can quickly produce high-quality solutions to difficult problems.”
“This means quantum computing may revolutionize our ability to solve problems that are hard to address with even the largest supercomputers.” the DOE added.
Quantum computer companies have seen their shares skyrocket in the last several months as enthusiasm for the sector increased.
However, disaster struck last week when Huang said that “very useful quantum computers” are probably two decades down the road.
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Nvidia CEO’s remarks spark selloff
“If you said 15 years for very useful quantum computers, that would probably be on the early side,” Huang said during a talk with analysts. “If you said 30, it’s probably on the late side. But if you picked 20, I think a whole bunch of us would believe it.”
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Investors inflicted a 20-megaton shellacking on the industry. Shares of IonQ (IONQ) , Rigetti Computing (RGTI) , D-Wave Quantum (QBTS) and Quantum Computing (QUBT) all cratered faster than a speeding qubit.
It was time for a rebuttal.
First, D-Wave Quantum CEO Alan Baratz said that Huang was “dead wrong.”
He said that his company is “commercial today,” and its services are being used by companies like Mastercard (MA) today, “not 30 years from now, today.”
In July 2022, Mastercard and D-Wave Quantum announced “a multi-year strategic alliance to champion the acceleration and adoption of quantum computing solutions.”
In an interview with TheStreet, Baratz said, “These are all real business applications that have been built and are being used based on our quantum computers today, and there are many more that are in process,” Baratz said to TheStreet.
IonQ CEO delivers bullish quantum computing forecast for 2025
Then came Peter Chapman, IonQ’s chairman and CEO, who issued a statement on Jan. 10 saying that his company had a lot to offer.
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“Today’s classical computing hardware is limited by computational capacity and power requirements in ways that will likely prohibit society from ever being able to solve some of its most pressing problems,” he said.
Chapman cited a McKinsey study that said global quantum investment had reached $50 billion by the end of 2023. The same report said that “progress in quantum computing, however, is expected to remain slow.”
He said companies such as Amazon (AMZN) , Google (GOOGL) IBM (IBM) , Microsoft (MSFT) and Nvidia “are investing and hiring in the quantum compute area today.”
Chapman also offered up a positive outlook for IonQ this year.
“We anticipate that 2024 results will be at the high end of our bookings and revenue guidance and are extremely excited about 2025.” he said. “We believe that IonQ will be profitable, with sales approaching $1 billion, by 2030.”
IonQ reported a third-quarter loss of 24 cents per share in November, missing Wall Street’s call of a 23-cent loss. However, IonQ’s revenue surged 102% to $12.4 million, beating analysts’ forecast of $10.56 million in sales.
IonQ’s shares ended up nearly 7% following Chapman’s comments, and the company’s stock is up about 160% from a year ago.
Analyst: Nvidia facing quantum computing threat
“The world depends on secure communications from financial services to military applications,” he said. “IonQ is a leader in quantum networking, which we believe is as significant a market as quantum computing.”
Chapman noted that one of the areas facing “the most significant potential disruption is strong AI, where we believe natively quantum AI will outperform classical AI.”
Related: Nvidia CEO Jensen Huang’s blunt words on quantum computing spark backlash
Nvidia, the Dow Jones Industrial Average’s top performer in 2024, is the second most valuable company in the world behind Apple (AAPL) and has been the darling of the investment world.
Some observers have suggested that Huang’s comments might have been motivated by self-preservation, including TheStreet Pro’s Stephen Guilfoyle who wondered if Nvidia stands to gain “if the quantum computing craze is pushed out a bit.”
Gil Luria, head of technology research at D.A. Davidson, which has a buy rating on IonQ told Investor’s Business Daily that “we believe Mr. Huang’s comments may have been somewhat self-serving.”
The analyst maintained that quantum computing will be a major trend in tech in as early as five years and poses a serious threat to Nvidia.
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“Once quantum computing becomes powerful enough, it will likely replace some of the uses of GPU data centers with a much smaller footprint and much faster computation,” Luria said. “That means quantum computing is an existential threat to Nvidia, which it would then want to wish away.”
DA Davidson initiated coverage on IonQ stock in December, saying company “represents a compelling pure-play investment positioned to capitalize on quantum computing’s rapid growth, driven by increasing inadequacy of classical computing for solving complex problems.”
Craig-Hallum’s Richard Shannon said quantum computing could be “disruptive to parts of the classical compute business, of which Nvidia is a chief beneficiary,” according to TipRanks.
He added that over the next few years, there will be “considerable government-related revenues” coming in and said that if “investors are worried about minimal revenues that will require dilution, they are missing a key part of the equation.”
“While we aren’t going to get ahead of ourselves, in terms of baking in real-world sales at this time, investors should recognize that the opportunity is large, and in combination with a strong balance sheet (we see balance sheet risk as eliminated for at least 2-3 years), IONQ is the safest way to quantum computing,” he said.
A Nvidia spokesperson said the company declined comment.
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