The modern digital world is built with its transistor-based chips on the foundations of Quantum Mechanics, the physics governing the world at the fundamental level.

However, the world has barely scratched the surface when it comes to the full potential of Quantum Mechanics, that is, until Quantum computing came to the foray. In the same spirit but in different light to its classical counterpart, quantum-computing technology seeks to exploit particle superpositions for computing operations.

It differs from classical computing due to the particle superpositions that occur at the quantum scale, allowing a qubit to be in a state of both 0 and 1 until it interacts with the environment. This exploit would allow Quantum computers to outperform classical computers exponentially in certain computing tasks. This could have huge implications for healthcare, finance, telecom, and energy industries, among others, ushering the world in a new era of accelerated economic growth. Mckinsey estimates that an economic value of $0.9 – $2 trillion can be extracted by 2035 across four industries – chemicals, life sciences, finance and mobility – due to quantum computing.

The McKinsey report estimates the Quantum computing market size to be between $45 billion to $131 billion by 2040.

Precedence Research appears more conservative and probably more grounded (You’ll see why). According to their report, the market for quantum computing is around $1 billion as of this year and is projected to expand at a CAGR of 30.9% from 2024 to 2034, reaching a size of $16 billion by the end of the forecast period. The US is expected to comprise $7 billion of the projected quantum market pie by the end of 2034. The market in the US is expected to grow at a CAGR of 31.2% from 2024-2034. As of 2023, North America unsurprisingly comprises 61% of the quantum-computing market.

As we point out in a similar article from May, analyzing the quantum-computing equity market based on an ETF exposed to it is a bit tricky. Very few companies have core business related to quantum computing and most companies in these ETFs have peripheral Quantum computing projects but are big and high-performing in other industries that are core to their business, so an ETF’s performance wouldn’t be saying much about the quantum computing industry.

Therefore, we’ll delve a little deeper to see what actual challenges there are in the industry and whether they can be practically solved for the delivery of a return on investment as far as scalable practical use cases go.

Technological Challenges with Quantum Computing 

Solving Quantum computing is akin to a Herculean labor. It’s hard to argue with the laws of physics, and when it comes to Quantum computing, a major problem yet to be overcome is Decoherence-induced errors. Decoherence is the enabler of transition from Quantum physics to the everyday physics we experience. Qubits (the quantum equivalent of bits) can only remain in a superposition as long as there’s no interaction with the environment.

Even the slightest interaction causes them to decohere to classical bits, introducing computing errors. The hard part is to keep them in a superposition long enough for quantum computation to be viable. Further, to scale quantum computing, you have to add more qubits to the system, but adding more qubits, in principle, increases the probability of error. Finally, any approaches to error correction must obey the Quantum no-cloning theorem, which makes these approaches inherently more challenging than their classical counterparts.

Progress to Overcome Challenges

In 2022, Azure Quantum demonstrated the soundness of physics required to build topological qubits (these qubits are different in that they can maintain coherence for longer and would thereby lead to a reduced error rate through more stability).

On the other hand, Researchers at Quantum AI, an arm of another big tech company, made a breakthrough in 2023, demonstrating a reduced error rate even with an increased number of traditional Qubits. However, rare correlated error events that happened roughly every hour limited the exceptionally low error rate required for practical quantum computing, with more research required to tackle them.

What the Big Money Says

Despite these steps, the challenges remain to be effectively overcome. It’s anyone’s guess how long it’ll take for quantum computers to scale and become economically viable. If the amount of capital being invested by venture capital firms in the industry is any guide, it certainly doesn’t look good for the industry as of recent.

According to IQM’s State-of-Quantum Report of 2024, the venture capital invested in Quantum startups dropped by 50% worldwide in 2023 compared to the year prior, with the US quantum startup ecosystem seeing the greatest decline of capital at 80%.

As far as public equity in the quantum computing industry goes, it is overall yet to be profitable. The industry hasn’t experienced any operating leverage in any meaningful sense and is focused on growing revenue in its early stage. The hard problems with regards to practicality and scalability has resulted in many quantum computing stocks  trade at price levels that make them non-compliant with stock exchanges, resulting in delisting threats by stock exchanges.

With that in mind, let’s move to the 10 Best Quantum Computing Stocks to Buy According to Analysts.

Also read why Jim Cramer can’t recommend a particular quantum computing stock here.

Methodology

For our list, we’ve selected companies that have a presence in the quantum computing industry and ranked them on the basis of their 12-month price upside on analysts’ consensus. Please note that we have used the median upside because average upsides can be greatly affected by outlier analysts on either side of the low or high.

For some stocks, both mean and median upsides were too low, but since we wanted to limit our list to pure-play stocks as much as we could, we chose them using the high end of the upside, provided that at least 9 analysts had contributed to their average upside.

Finally, we ranked the stocks on weighted scores, with median upside having a weight of 0.4 while analyst count having a weight of 0.6. For stocks for which we have used high-end of the upside, the weight for the upside is 0.2, with analyst-count weight reduced to 0.4. For stocks whose upside is based on only one analyst, and if the upside is over 30%, we assigned weights of 0.01 to both the upside and the analyst count.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

READ ALSO 10 Best Future Stocks for the Long Term and 10 Best Affordable Stocks Under $10 to Buy.

10. Honeywell International Inc. (NASDAQ:HON)

High Upside Potential: 9.74% 

Number of Analysts: 9

Insider Monkey Weighted Score: 5.5

Honeywell International Inc. (NASDAQ:HON) is a conglomerate headquartered in Charlotte, North Carolina. The company operates in several industries like aerospace, energy, logistics, technology and healthcare, among others.

The conglomerate operates in the quantum computing industry through its company Quantinuum, which was formed after the merger of Honeywell Quantum Solutions and Cambrige Quantum. Among Quantinuum’s quantum partners are Airbus and BMW Group.

In quantum, the company is known for ion-trapped qubits that it claims are easier to manufacture and control. The advantages offered by the approach are high fidelity and long coherence times. Compared to other technologies like superconducting qubits, trapped ions have shown better error rates.

In January 2024, Honeywell (NASDAQ:HON) raised $300 million for Quantinuum, bringing the company’s valuation to $5 billion. This funding round, led by partners like JPMorgan Chase, has boosted investor confidence in Honeywell’s quantum initiatives. According to reports, Honeywell is considering an IPO for Quantinuum as early as 2025 and is reportedly looking for a valuation of $10 billion for its subsidiary.

In its 2030 roadmap, the company said it would have a working universal quantum computer it calls Apollo by the end of the decade. A total of 9 analysts have rated the stock, and although the median upside is -3.31%, we ranked it on its upside from the high end, which stands at 9.74%.

9. Quantum Computing Inc. (NASDAQ:QUBT)

Upside Potential: 674.34% 

Number of Analysts: 1

Insider Monkey Weighted Score: 6.75

Quantum Computing Inc. (NASDAQ:QUBT) is an integrated photonics company, with its products designed to operate at room temperature and low power. The upside potential of the company is based on only one analyst, and the company is substantially risky. We tracked its financials from Q1, 2023 to Q2, 2024. QUBT has been growing its revenue with the exception of Q1, 2024 when the revenue growth rate declined by -77.6%.

We tracked the number of hedge funds that have had positions in Quantum Computing Inc. (NASDAQ:QUBT) from Q3, 2022 to Q2, 2024 from our database and there is nothing remarkable to see. The growth rate of the number of hedge funds with a stake in QUBT has virtually remained unchanged during this time, with Peak6 Capital Management and Citadel Investment Group being the only two hedge funds invested in the company. The former held shares worth $50,240 while the latter held shares worth $7,739 as of Q2, 2024. However, their stake value in the stock decreased by 24% and 91% from the previous quarter.

In August 2024, QUBT announced receipt of a notice from the NASDAQ that it was not in compliance with the listing requirements. The reason was that QUBT did not file its quarterly report on Form 10-Q for the period ended June 30, 2024, within time.

The company is on a deadline until December 16, 2024, to file the required financial documents to be in compliance again or face delisting from NASDAQ. QUBT attributed the delay to a recent change in its auditors. On May 3, 2024, the company dismissed its previous accounting firm, BF Borgers CPA PC, following an SEC order against the firm. Subsequently, on June 6, 2024, Quantum Computing Inc. (NASDAQ:QUBT) appointed BPM LLP as its new independent registered public accounting firm.

On October 17, the company announced that it had received a NASA contract to eliminate sunlight interference from LiDAR spectral mapping in low Earth orbit. This could help the company grow its application in space-based projects.

8. International Business Machines Corporation (NYSE:IBM)

High Upside Potential: 7.64% 

Number of Analysts: 14

Insider Monkey Weighted Score: 7.1

International Business Machines Corporation (NYSE:IBM) is an American technology company known mostly for its computing products and services. International Business Machines Corporation (NYSE:IBM) has been one of the early pioneers in the quantum computing industry, with its IBM Quantum System One being one of the earliest efforts at quantum computing. In 2023, International Business Machines Corporation (NYSE:IBM) shifted its strategy from focusing just on qubit scaling to emphasizing on gate-operations quality as well, to improve overall computing efficiency.

In 2023, the company claimed it had achieved quantum utility in research it published in Nature. In October 2024, the company opened its first European quantum data center in Germany, allowing the company to provide utility-grade quantum services to European customers, and expanding in quantum markets outside the US.

In 2025, the company aims to demonstrate quantum-centric supercomputing, scale systems and reduce costs through 2027, and deliver a fully error-corrected quantum computer in 2029. According to the company’s quantum roadmap, all its 2023 objectives have been met, 2024 objectives are well on schedule. As of 2020, the company has over a 100 customers of its quantum computing technology.

7. FormFactor, Inc. (NASDAQ:FORM)

Median Upside Potential: 37.02% 

Number of Analysts: 8

Insider Monkey Weighted Score: 19.6

FormFactor, Inc. (NASDAQ:FORM) is a Cali-based company that designs performance-enhancement products for chip companies, in addition to testing and measurement systems for integrated circuits. Quantum computers require temperatures approaching absolute zero to allow qubit coherence. This is the market that the company operates in when it comes to quantum computing. It provides cryogenic environment systems, with products including sub-10 mK dilution refrigerators, and sub-100 mK cryostats, among others.

Based on the forecast of 8 analysts, the 12-month median upside for FormFactor, Inc. (NASDAQ:FORM) is 37%. Bear in mind though, that FORM is not a pure-play quantum computing stock, so its risk profile is not as high. However, since it does provide significant exposure to the industry through its sales of cryogenic systems so its well-positioned to benefit from growth in the industry without exposing itself fully to the risk.

As of Q2, 2024, 29 hedge funds from among the ones tracked by Insider Monkey held positions in FORM, an increase of 9 from Q1.

6. Intel Corporation (NASDAQ:INTC)

Median Upside Potential: 20.86% 

Number of Analysts: 25

Insider Monkey Weighted Score: 23.3

Intel Corporation (NASDAQ:INTC) has had a bad run in the past few years due to bad management decisions, failure to advance in chip fabrication, and decreased market share due to ARM-based chips. It’s down 53% year-to-date and 60% on a 5-year annualized basis. We have included Intel Corporation (NASDAQ:INTC) solely because of the potential of its quantum technology and low competition in this market compared to Intel’s other markets.

Intel’s silicon spin qubit approach rather than superconducting qubits has the promise to reduce the complexity associated with quantum hardware since spin qubits can operate at higher temperatures. Spin qubits are also smaller than superconducting qubits, allowing for more complex versions of quantum computers in principle on a chip of the same size.

In a paper published by Intel researchers in Nature in May 2024, researchers found that Intel’s approach results in 99.9% gate fidelity, an important milestone. Intel is well-positioned owing to its transistor-manufacturing credentials to create spin qubits through its 300mm CMOS manufacturing techniques.

5. NVIDIA Corporation (NASDAQ:NVDA)

Median Upside Potential: 4.46% 

Number of Analysts: 38

Insider Monkey Weighted Score: 24.5

NVIDIA Corporation (NASDAQ:NVDA)’s GPUs aren’t just dominating gaming and AI, they’re also the go-to choice for quantum simulations. The company’s CUDA-Q platform is also critical to accelerate quantum computing efforts. In May 2024, NVIDIA Corporation (NASDAQ:NVDA) announced that its CUDA-Q platform was being incorporated at several national supercomputing centers around the world (Japan, Germany and Poland) for quantum processing units inside NVIDIA-powered high-performance computing systems.

NVIDIA’s philosophy regarding quantum computing is that the future is hybrid (quantum/classical) systems for quantum-accelerated applications. In this regard, CUDA-Q is the first of its kind development platform that is seamlessly integrated across CPUs, GPUs, Quantum Processing Units (QPUs), and Quantum Emulators. NVIDIA’s DGX Quantum architecture is also in line with this vision.

Classical Encryption algorithms would be among the first things that would be threatened by Quantum-computing scalability and commercialization, endangering the security of the global digitalized economy. In this regard, NVIDIA has developed cuPQC to enable the acceleration of quantum cryptography algorithms to adapt digital security to the age of quantum.

Read how Blackwell is setting up NVIDIA for a major upside.

4. Microsoft Corporation (NASDAQ:MSFT)

Median Upside Potential: 15.79% 

Number of Analysts: 33

Insider Monkey Weighted Score: 26.1

Microsoft Corporation (NASDAQ:MSFT) is another big player in the quantum computing industry. Microsoft is taking an approach to error-rate reduction that is considered more challenging but also more rewarding. In 2022, Microsoft Corporation (NASDAQ:MSFT)’s initiative – Azure Quantum – demonstrated the proof of concept for building topological qubits. These qubits are inherently more resilient to decoherence than traditional qubits.

In February 2024, Microsoft announced that DARPA renewed funding for Azure Quantum to develop a utility-scale quantum computer based on topological qubits, due to the project’s promising recent results. The company will design a prototype for a fault-tolerant quantum computer based on topological qubits.

3. Alphabet Inc. (NASDAQ:GOOG)

Median Upside Potential: 19.89% 

Number of Analysts: 39

Insider Monkey Score: 31.5

Alphabet Inc. (NASDAQ:GOOG) is the all-too-well-known technology company known for owning and operating the search engine Google and web browser Chrome. Being that quantum-computing industry is capital-intensive, Alphabet Inc. (NASDAQ:GOOG)’s financial strength gives it an advantage, and it has made full use of the advantage. In 2019, the company claimed it had achieved quantum supremacy through its cutting-edge Sycamore system.

Alphabet is also one of the very few companies that are realistically at the bleeding edge of quantum-computing research. High error rates are the biggest obstruction to a scalable quantum computing system. As mentioned earlier, Alphabet, through its Quantum AI arm, made a breakthrough in 2023 in reducing error rates even with increased qubits. However, rare error-correlated events prevented Quantum AI researchers from demonstrating an error rate that was reduced enough for quantum computing to be scalable.

2. D-Wave Quantum Inc. (NYSE:QBTS)

Median Upside Potential: 108.33%

Number of Analysts: 7

Insider Monkey Weighted Score: 47.5

D-Wave Quantum Inc. (NYSE:QBTS) is a leading company in the industry that develops and supplies quantum-computing systems and related software services. The company has been gradually scaling the number of Qubits in its systems. The first system was launched in 2011, with a 128-qubit chipset. The company has gone all the way from there to Advantage, which it launched in 2020, with over 5,000 qubits.

D-Wave Quantum Inc. (NYSE:QBTS) announced in early 2024 that the prototype of Advantage2 had been developed with 1200+ qubits and 10,000+ couplers, double the number of the previous prototype for the same system, and with substantial performance gains over the original Advantage system.

Even though QBTS has a number of customers, the fact that the commercial usefulness of early quantum computers is hotly debated doesn’t do the company any favors. It’s operating in a capital-intensive industry, with annual net cash being in negative figures since 2021.

Even though it’s growing its revenue on a sustained basis, the company struggles with profitability, which could make it hard for it to innovate. QBTS faced the threat of getting de-listed by the NYSE on October 2nd for the third time after its stock price went below $1 for 30 consecutive days.

Regardless, a number of analysts remain bullish on the stock, leading to a median 12-month upside potential of 108.3%. It’s on the back of the company’s growing customer base, especially after their announcement of potential quantum supremacy in March 2024. The qubit density for the company’s Advantage2 has increased to 4,800 from 1,200 earlier in the year, further growing optimism around D-Wave’s goal to reach 7,000+ qubits for Advantage2. A major catalyst for the company is the fast annealing technology that was launched in April this year, which saw high levels of adoption.

1. Rigetti Computing Inc. (NASDAQ:RGTI)

Median Upside Potential: 143.9% 

Number of Analysts: 4

Insider Monkey Weighted Score: 59.96

Rigetti Computing Inc. (NASDAQ:RGTI) is a california-based company that develops integrated circuits for quantum computers. RGTI has been losing momentum with wall street. According to Insider Monkey’s hedge-fund database for RGTI, the number of hedge funds that hold stake in RGTI declined by 74% from Q1, 2022 to Q2, 2024. However, four analysts disagree with the general sentiment of the market, with the median 12-month price upside for Rigetti Computing Inc. (NASDAQ:RGTI) being 143.9%.

Rigetti’s novel approach, Alternating-Bias Assisted Annealing (ABAA), enables more precise qubit frequency targeting and high fidelity. The approach is being used to fabricate chips including the company’s Novera and the upcoming Ankaa-3 system, which the company says its on track to develop by the end of 2024.

Following is what the CEO said in Q2 earnings call:

“We are seeing very promising results both with fidelity and speed on our current systems which leverage the underpinning technology of our upcoming Ankaa-3 system.”

While we acknowledge the potential of GE Vernova Inc. (NYSE:GEV) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.