Could Google's Advancement in Quantum Computing Potentially Warrant Purchasing Stocks?
Quantum computing presents significant opportunities for a company that first successfully introduces a functional device to the market. It appears that Google's parent company, Alphabet (with a 1.19% increase in GOOG and 1.12% in GOOGL), could be on that path, having achieved remarkable results with a chip manufactured by its subsidiary.
This chip, named Willow, made headlines by surpassing today's fastest supercomputer in a benchmark test, a feat never before achieved. However, does this development make Alphabet stock an attractive investment option?
The Willow chip sets a new standard
Unlike traditional computing that relies on 1s and 0s (bits) for processing information, quantum computing utilizes qubits, which are more powerful. Unlike binary bits, qubits represent the probability of a 1 or 0, allowing them to store infinitely more information. However, qubits can produce errors more frequently than bits due to their non-binary nature.
Google's researchers discovered that an increased number of qubits resulted in reduced errors. They also found that by arranging qubits in a grid system, interactions between them became easier, leading to an exponential decrease in errors. This breakthrough led to the development of Willow.
The Willow was tested using a random circuit sampling benchmark, a task which would take the world's fastest supercomputers an estimated 10 septillion years, a timeframe believed to surpass the age of the Universe. Yet, Willow completed the test in less than five minutes.
While this achievement is impressive, it should be noted that the benchmark test specifically caters to quantum computers, indulging in their unique characteristics. Nevertheless, this accomplishment signifies a groundbreaking advancement in quantum computing technology.
But does this advancement directly translate to a stock buy-in?
Quantum computing isn't the primary focus of Alphabet's investment thesis
Since the announcement of Willow's success, Alphabet's stock has experienced a 10% surge, representing an addition of around $250 billion to its market capitalization. Investors seem to believe this is a significant milestone.
However, we're still far from seeing quantum computing integrated in everyday devices like smartphones and laptops. This chart provided by Alphabet offers some insight into the current state of quantum computing implementation.
Though the RCS benchmark test was challenging, it possesses no commercial relevance beyond demonstrating that quantum computing can be conducted accurately. The focus now shifts to developing commercially viable applications.
When such applications prove successful, we can discuss the potential for quantum computing as a viable business for Alphabet. Until then, investors should consider purchasing Alphabet's current stock, which means investing in its existing business model, supplemented by a quantum computing venture that may not yield returns for a decade or more.
As of Q3, Alphabet's revenue increased by 15% year-over-year. Earnings per share (EPS) also saw a significant rise, from $1.55 last year to $2.12 this year, a 37% increase, thanks to an enhanced operating margin.
Its core advertising business continues to flourish, while Google Cloud has also emerged as a bright spot for the company. With the stock trading at 21 times 2025 earnings, it may not be the cheapest option, but compared to many big tech companies, its value is reasonable, making it a stock worth considering for investment.
However, if quantum computing is your primary investment focus for Alphabet, patience will be essential, as it may take a decade or more for returns to materialize.
The achievement with the Willow chip in quantum computing has led to a 10% surge in Alphabet's stock, indicating that some investors view it as an attractive opportunity in the field of finance. However, it's important to note that while the Willow has broken new grounds in quantum computing, commercial applications are still in development, making investing primarily in quantum computing a long-term pursuit for potential investors.
