The Quantum Computing Race: How to Invest
Full Ecosystem & My Basket
I’ve tracked quantum for a while but never fully enough to gain an edge relative to other themes I’m focused on. I never invested in the IONQ, RGTI, QBTS boom etc and I had no regret on that.
But the more time I’ve spent listening to those who know where quantum truly is gave me a pretty good push to get this article and quantum basket out. Here’s the basket performance (and constituents):
Sundar Pichai for example thinks quantum is where AI was 5 years ago.
Until more recently quantum has been a theoretical promise and nothing more but it’s now slowly entering a period of commercial utility. Most notably in materials science, chemistry, drug discovery, logistics, and in national security too.
A quick intro on quantum computing. I’ll keep this brief because there’s thousands of YouTube videos and articles out there explaining what quantum does and they’ll probably explain it better than I will.
My edge is in painting out the investing roadmap for you:
Quantum Computing
Quantum computers behave very differently to classical computers. Classical computers process information in “bits”. That’s a 1 or a 0. That’s it.
Quantum computers operate using quantum bits (qubits). This allows them to be in multiple states at once which leads to problem solving on a whole different level to classical computers.
My Focus
My focus is more on the technologies and bottlenecks involved in the quantum computing revolution. Just like with the AI revolution, we’ve seen breakthroughs in optics, lasers, 3D packaging etc…we’re going to see that same process play out for quantum. And this means a new wave of industrial development focused on cryogenic control chips, scalable quantum chip fabrication, precision lithography, and the interconnects needed to link it all together.
Looking at the TAM, McKinsey is currently estimating quantum computing could create $1.3 to $2.7 trillion in economic value by 2035. I take these estimates with a pinch of salt because the range of estimates I’m seeing is so broad and the timelines I’m seeing on when quantum becomes economically active is wide too.
But the big picture is there. Quantum has a big future. And it’s one to start learning about.
The US Department of Commerce is telling us exactly this as well. Just last week, nine letters of intent were signed to direct $2.0 billion through the CHIPS and Science Act to quantum companies for non-controlling equity in each company. These equity stakes were split nicely across a range of quantum architectures such as photonic, silicon-spin, trapped-ion, and superconducting.
Whether it’s worthy of an investment today is another question. Most quantum plays aren’t really breaking out technically just yet so dependent on how much those technicals mean to you could depend on when you consider initiating a position.
Here’s how I’d breakdown quantum (without looking at the pure plays like IONQ, RGTI, QUBT, and QBTS):
Critical Minerals
Cybersecurity
Lasers & Photonics
Superconducting Circuits
Cryogenic Test Equipment
Quantum Hardware
Quantum Chip Fabrication
Quantum Applications
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Critical Minerals: The Foundation
It depends on the quantum architecture used, but a range of critical minerals and rare earths are needed in quantum too. I’m already very bullish on rare earths over the next 5 year technological revolution, but add quantum on top of this which could be another tech revolution on its own, and the demand for rare earths over a 10+ year period is likely substantial relative to what it is today.
The key plays are niobium and nickel which are critical for superconducting quantum computers (more on this below). It’s one of the reasons we’ve seen Chinese firms take huge stakes in Brazilian niobium and nickel miners over the last decade.
Examples:
CMOC Group acquired full ownership of Anglo American’s niobium business.
CNMC (Chinese state owned) purchased Mineracao Taboca.
CITIC Group formed a consortium called China Niobium Investment Holdings.
The U.S. currently is 100% import dependent on niobium with the vast majority of that coming from Brazil.
Niobium is used in superconducting qubits, capacitors, and resonators. It’s in the core architecture of IBM and Google style quantum computers. Importantly, the supply risk is quite severe with 85% of global production coming from a single mine in Brazil.
And then there’s nickel. Nickel is part of the mu-metal shielding process. Mu-metal magnetic shielding is the material used to stop any stray magnetic field. Nickel is by far the best metal for this job and probably makes it one of the most underappreciated metal going forward assuming quantum computing turns out like we expect it to.
Here’s the niobium playbook:
NioCorp Developments (NB): I wouldn’t personally overcomplicate it if you’re looking at pure niobium investments aside from NB. It’s developing the only niobium and scandium project in the US making it the most advanced niobium resource outside the US.
Personally, I’m invested in scandium through Sunrise Energy Metals (SRL.AX/SREMF) but I have no exposure to niobium right now. I suspect that’ll change at some point with a potential addition of NB to the portfolio. More than just being nice thematically, NB has a great balance sheet with 8+ years runway before $800M bank financing comes through.
I’ve been using TrendSpider for all of my charting needs for a while now and honestly haven’t looked back - if you’re not already on it… worth checking out. You can sign up through my link above.
Forward P/S is only ~1.5x on implied $577 million in annual revenue confirmed from materials alone. I think this one is cheap and a great trade thematically for quantum and for other reasons too.
Here’s the nickel playbook:
