Quantum computing has suddenly become a buzzword on Wall Street.
Ever since Alphabet (GOOG 1.62%) (GOOGL 1.60%) reported that it hit a new milestone with Willow, its new quantum chip, quantum stocks have been soaring. It said that Willow can reduce errors exponentially as it scales up, and it performed a standard benchmark computation in just five minutes that would take one of the world’s fastest supercomputers today 10 septillion years.
The announcement sparked a rally in Alphabet stock and sent shares of small-cap pure-play quantum computing stocks like D-Wave Quantum (QBTS -9.29%), Quantum Computing (QUBT -9.65%), Rigetti Computing (RGTI -12.54%), and IonQ (IONQ -6.40%) skyrocketing.
However, in January, those stocks plunged on pushback from multiple high-profile tech CEOs. First Nvidia CEO Jensen Huang said that “very useful” quantum computing was 15 to 30 years away. Just a few days later, Meta Platforms CEO Mark Zuckerberg echoed those remarks, saying he believed it was “quite a ways off from being a very useful paradigm.” He also thought that “pretty smart AIs” would be available before quantum computing is useful. Even former Cisco Systems CEO John Chambers said Quantum Computing was further ways in the “AI decade”.
However, quantum stock leaders have jumped to defend the technology and their businesses.
Image source: Getty Images.
Quantum computing vs. AI: What’s the better investment?
Investors should be aware that quantum computing is still an emerging technology. Companies like Quantum Computing, D-Wave Quantum, and Rigetti Computing have almost no revenue. IonQ is the largest of the four quantum stocks, but its 2024 guidance calls for just $38 million to $42 million in revenue, though revenue doubled in the third quarter. At a market cap of $9 billion, the stock trades at a price-to-sales ratio of more than 200, showing investors are betting big on the stock.
The potential of quantum computing stocks is debatable, as is the timeline for it being disruptive, but between quantum and AI, AI is more deserving of your investment dollars.
That technology is already here, growing quickly, and disrupting a wide range of industries. AI stocks also have more room to run. Keep reading to see two worth buying today.
1. Micron Technology
Micron Technology (MU 3.07%) is best known as a supplier of memory chips, but these days, the company is seeing a surge in demand from AI, like many of its peers.
Revenue in its fiscal first quarter, which ended in November, jumped 84% to $8.7 billion, but what really stood out was its growth in the data center, where revenue jumped more than 400% on a year-over-year basis and 40% sequentially, which management attributed to strong AI demand.
Micron also has a close working relationship with Nvidia, which is believed to be its biggest customer, and its stock recently bounced after Nvidia said it was using its chips in its new Blackwell platform.
Right now, Micron also looks like an appealing opportunity for investors because the stock tumbled after its recent earnings report on weak guidance. However, management said it would return to strong growth, which could pave the way to significant gains for the stock. At a forward P/E of 14, the stock looks cheap for its growth potential.
2. TSMC
Another AI stock that looks like a must-have in 2025 is TSMC (TSM -1.53%), or Taiwan Semiconductor Manufacturing.
TSMC is the world’s largest contract chip manufacturer, handling production for the likes of Nvidia, Apple, Broadcom, and others. That gives TSMC tremendous market power, as it has market shares is more than 50% in third-party chip manufacturing, and roughly 90% in advanced. In many ways, it’s a linchpin in the global economy.
In the fourth quarter, the company continued to push its lead in advanced chips as 74% of its revenue now comes from advanced chips, which it considers to be 7 nanometers or less.
TSMC’s revenue growth came in at 38% and its operating margin nearly reached 50% in the quarter.
With AI demand set to keep growing and a broader recovery in the chip sector afoot, TSMC looks set to have another strong year in 2025 and beyond.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Broadcom, Meta Platforms, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Apple, Cisco Systems, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
