Quantum computers: along with AI, the most groundbreaking technology of our time
Market observers have been whispering for years that quantum computers could become the ‘next big thing’ for investors. Thanks to the dizzying computing power it offers, quantum technology is seen as a potential key to solving major scientific and societal challenges, ranging from green chemistry to the development of new drugs. Since the breakthrough of Willow, the quantum chip developed by Google’s parent company Alphabet, quantum-related stocks have once again become a topic of conversation. But as an investor, where should I be focusing my attention?
Quantum computers have the potential to turn entire industries on their heads. The question is not so much ‘if’ as ‘when’.
Joris Franck, Portfolio Manager at KBC Asset Management
‘A traditional computer processes information step by step using ‘bits’, which store data as a 0 or as a 1, says Joris Franck, Portfolio Manager and Technology Expert at KBC Asset Management. ‘Quantum computers are based on the principles of quantum physics and work with what are called ‘quantum bits., or ‘qubits’. Unlike a bit, a qubit has the ability to be both a 0 and a 1 at the same time. This is sometimes called a 'superposition' in technical jargon. Moreover, qubits can also be joined together so that the state of one qubit depends on the state of the other, regardless of the distance between them. We call this 'entanglement'. The upshot is that a quantum computer can process exponentially more data and perform huge numbers of calculations - including complex ones - simultaneously.’
The metaphor of the maze has sometimes been used to explain the power behind quantum computers. ‘If you give a traditional computer the task of finding its way out of a maze, it will go through all the possible options one by one,’ Franck explains. ‘With a little luck, that will be a fast process, but a traditional computer can also sometimes take a very long time to complete the task. The great advantage of a quantum computer is that it can try out all the available pathways simultaneously. That enables a quantum computer to tackle complex problems that at present cannot be solved by even the most powerful supercomputer.’
A bridge to the future
Quantum computing opens doors that were previously closed, such as:
- The further development of artificial intelligence (AI)
The unmatched computing power can enhance existing machine learning algorithms and enable even more efficient data processing. With AI training many times faster, the development of new applications is also accelerated.
If we manage to creatively combine AI and quantum computing, historic innovations can develop very quickly. Combining the two technologies renders the possibilities almost limitless.
Joris Franck, Portfolio Manager at KBC Asset Management
- The discovery of new materials and drugs
Quantum computers can simulate molecular structures and chemical reactions with great precision. ‘Think of a quantum computer as a giant chemical laboratory,’ explains Franck, ‘where, instead of mixing substances in a real lab and seeing what happens, you can simulate everything at the same time.’ This makes it possible to carry out clinical research on materials or drugs, which today is both very time-consuming and very expensive, much more efficiently. ‘We might therefore see the first really practical applications emerging in the pharmaceutical or chemical industries,’ Franck adds. ‘Take the example of genome sequencing, where, thanks to quantum computers, pharma companies will eventually be able to develop drugs based on your individual genetic profile. Or they might open the door to finding a solution to the protein folding problem, creating huge opportunities for treating diseases like Alzheimer's or Parkinson's.
- Optimising resources and processes
Think of logistics, finance and supply management. ‘Quantum computers can play a role in monitoring traffic,’ Franck states, to give an example.
Quantum computers can break traditional encryption methods, which are crucial for maintaining data security. The race to develop quantum computers therefore runs parallel with the development of new, quantum-resistant data security systems.
Joris Franck, Portfolio Manager at KBC Asset Management
- The need for - and development of - quantum-resistant cryptographic techniques
Our digital lives, from personal communication to online shopping and banking, are currently encrypted - and thus secured - using mathematical codes. ‘Numerical encryption secures both our online purchases and the messages we send and receive via WhatsApp,’ Franck explains. ‘Even the fastest supercomputer would take an infinitely long time to crack those numeric codes. But when a quantum computer can solve such a calculation in a fraction of a second, the security of the entire internet is immediately at stake. Fears that quantum computers will be able to crack the security codes of bitcoins and other virtual currencies are justified. It’s logical that all of this raises concerns. So the process of finding ways to guard against it also needs to start right now.’
The race for supremacy
Governments are investing heavily in quantum computing, if only because of this decryption risk. ‘Nobody wants a situation where communications for the military or national intelligence services can no longer be protected,’ says Franck.
The development of quantum computers is a high-stakes race. Countries like China and America, as well as several European countries, understand that the stakes are high and are investing heavily in research programmes. Large tech companies are competing against each other with their investments in the race to achieve quantum supremacy.
Joris Franck, Portfolio Manager at KBC Asset Management
China is leading the way, with more than USD 15 billion in government funding, underlining China's ambition to lead the global race in quantum technology, with profound implications for national security, cybersecurity and the global economy.
US tech companies like Google, Amazon and IBM are also investing heavily in Research & Development. Quantum computing is a technology ‘where the stakes are potentially highest for US economic and national security,’ according to the National Counterintelligence and Security Centre (NCSC).
And although Europe’s efforts are fragmented, several countries in this region, too, are contributing billions to the cause.
We are not there yet. And, while there is still a lot of uncertainty surrounding quantum computers, everyone knows that whoever is the first to come up with a truly useful and accurate computer will have a huge economic and even military advantage.
Joris Franck, Portfolio Manager at KBC Asset Management
Fundamental research phase
Despite its potential, quantum computing is still in its early stages and faces several challenges before it can be widely deployed.
- Qubits are extremely sensitive to environmental disturbances, necessitating error correction
‘The slightest change in temperature or the slightest vibration can disrupt a quantum computer,’ Franck explains. ‘Each relatively small chip of a quantum computer therefore sits in a giant container, almost like a freezer, with extremely low temperatures - around absolute zero, or about minus 273 degrees - in which all the electronics are shielded.’ Researchers are actively working to develop more stable qubits and techniques to correct errors.
‘Willow, Alphabet's new quantum chip, succeeded for the first time in reducing the error rate exponentially,’ Franck stresses. The chance of an error occurring is now one in a thousand. That’s still far too high for a fully functional quantum computer, which should be able to perform many billions of calculations simultaneously using a large number of qubits, but it is a promising breakthrough. Alphabet produced its first quantum chip, Sycamore, back in 2019. What Willow can do, compared to Sycamore, shows the stunning pace at which the technology is evolving.’
Scaling up the number of qubits, while maintaining their consistency and minimising errors, has been and remains a major challenge for quantum computing.
Joris Franck, Portfolio Manager at KBC Asset Management
- Integration with traditional systems
Quantum computers will need to be able to work alongside traditional computers in a hybrid computing environment. Ensuring seamless integration and efficient communication between the two systems is crucial.
- Cost and accessibility
The high cost of developing and maintaining quantum computers is a barrier to entry for many organisations. Making quantum computing more accessible and affordable will be key to its widespread acceptance.
As an investor, the key is to dip toe in the water and keep a cool head
Although the technology is still in its infancy, ongoing research and investment are paving the way for a future where the full potential of quantum computing can be realised.
‘Willow has brought a possible breakthrough for the quantum computing market closer. But we should not forget that we are still in the initial phase; we are in a phase of experimental development. It is difficult to gauge which company will play which role,’ Franck warns. ‘There are as yet no broad commercial applications that will yield profits in the foreseeable future, but for investors with a higher risk tolerance, it is an interesting case to keep an eye on.’ So keeping a cool head, but at the same time dipping one toe in the water, is the way to go.
Quantum computing may still sound like science fiction, but we are looking - yet again - at a technological revolution. Just like with AI. We have so far seen only a fraction of what is possible. Once the technology breaks through, the impact on our society will be huge.
Joris Franck, Portfolio Manager at KBC Asset Management
‘Investors willing to embrace a degree of risk can always make a highly speculative investment in a quantum start-up, but those who prefer to mitigate the risks - which are absolutely present - can also opt for the big, established technology giants,’ Franck emphasises. ‘Alphabet has a proven track record in developing and commercially exploiting new technologies, but it is by no means the only company working on quantum technology. Microsoft and Amazon offer quantum services on their cloud platforms: Quantum Computing as a Service (QCaaS), gives users access to quantum processors, development tools and simulators to build and test quantum algorithms in a cloud environment. Other big players like Nvidia, Intel and IBM are also working on it. It’s important for investors to bear in mind that, for the major tech giants, everything to do with quantum computing - currently - represents a negligible part of their revenue. On the other hand, their deep pockets mean they have the necessary investment capacity.’
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The information contained in this publication is for information purposes only and should not be considered as investment advice.
