21st Jan 2022
Quantum computing could be having its breakthrough moment, as quantum computing company Rigetti becomes the second pureplay quantum computing stock in as many months to trade publicly. Like IonQ, which listed on the NYSE in October1, Rigetti will appear on the NYSE after merging with the SPAC Supernova Partners Acquisition Co. II Ltd2.
Two publicly traded quantum stocks might not seem like much, but it adds to the feeling of being at the beginning of a broader movement, rather than observing a flash in the pan.
2021 Quantum leaps
Indeed 2021 has seen a $250 bn Senate Bill to improve the US’s quantum competitive edge against China and a new UK-US- Australia security pact also centered around quantum in the military. December saw the merger of two quantum giants, Honeywell Quantum Solutions and Cambridge Quantum to form Quantinuum. The combined entity is hoped to rival the legacy tech giants who are also racing towards quantum quantum stability, usability and commercialization.
In the markets, a recent report published by the Street.com ranked Defiance’s quantum ETF (QTUM) as one of the top tech ETFs for 2022, beating out all of all of GlobalX’s and Ark’s suite of ETFs. QTUM, which provides passive exposure to a range of companies in the next generation computing space, has risen over 34% (Market Price) so far in 2021; compared to Cathie Woods’ active ARKK’s fall of 22% (Market Price).
Rigetti is quickening the beat of quantum*
An impressive roster of investors are placing money on this new technology by participating in Rigetti’s IPO, including Wall Street heavyweights T. Rowe Price and Franklin Templeton, and InQ-Tel, the venture arm of the CIA.3 David Cowan, an early investor in Twitch who then invested $129 million in Rigetti in 2020, referred to the deal in historic terms. “This has the opportunity to become one of the massive tech companies on the planet. I mean, this is, this is no less important than the transistor for the 20th century in terms of computation.”4
To industry thought leaders, Rigetti is a serious competitor for Google and IBM; although it’s smaller, it’s considered more agile and to have more expertise5. Rigetti is already a leader in scalable quantum processors, having introduced scalable superconducting chips in June 2021, which could serve as the building block for next-generation quantum processors6, and it expects to scale from today’s 80-qubit computers up to 4,000 qubits by 2026.7
Still flushed with the glow of its SPAC deal, November saw Rigetti selected to lead a quantum simulation project for fusion energy funded by the Department of Energy (DoE), in collaboration with Lawrence Livermore National Laboratory and the University of Southern California. The 3 year, $3.1 million project will use Rigetti’s cloud-based quantum computers to simulate plasma dynamics.8
But to quantum supporters, the impact of Rigetti’s SPAC deal goes far beyond the company itself.
Rigetti’s success could breed more success
Rigetti is widening the path first blazed by IonQ, making it harder to dismiss quantum as a passing trend or the stuff of science fiction. The more stable quantum computing stocks are perceived to be, the easier it will be for other companies to attract investment, and confidence in the sector as a whole will increase. The Quantum Zeitgeist poetically claims that this deal will “take the entire sector out of the darkness of the private equity markets and catapult quantum into the light.9“
To thought leaders, the ongoing development of quantum is of supreme importance. Back in 2017, the National Review wrote “Let’s make no mistake: The race for a quantum computer is the new arms race.10” In the intervening 4 years, nothing has happened to dampen that forecast.
According to Cowan, the potential of quantum is incredible, “Anything that requires machine learning or optimization, or certainly anything that requires an understanding of physics—like biology, chemistry, materials—anything that involves simulation, like designing airplanes or cars, anything that uses heavy computation, which of course is lots and lots of interesting industries—all of those will get a huge boost.11“
The verticals expected to benefit from the power of quantum computing include heavy industry like chemicals, oil and gas, and petrochemicals; logistics and financial services; and healthcare and life sciences. ExxonMobil and IBM are already exploring using quantum algorithms to solve routing formulations12, and in February 2021, BP joined the IBM Q Network to use its quantum computers to investigate ways to reduce carbon emissions and increase operational efficiency13.
The success of quantum computing no longer looks like a quantum leap
Rigetti’s move to the NYSE reflects the maturing market as much as it drives its ongoing maturation. Funding rounds for quantum stocks are rising, with venture capitalists investing a total of almost $1.02 billion in companies in the quantum space in 2021, a rise of 68% from 2020 and more than 500% up from 201914.
Specialist incubators are rising for quantum companies, like the Quantum Technology Enterprise Centre (QTec) in Bristol, UK, which was established in 2016 and has already supported 27 companies. Giants like Google, IBM, Microsoft and Honeywell are bolstering their quantum tech, serving as both incubators and buyers for promising startups.15 Honeywell’s quantum division merged with British quantum start-up Cambridge Quantum in July16; in October, Amazon built the AWS Center for Quantum Computing at Caltech17; and also in October, IBM entered a strategic collaboration agreement with Raytheon Technologies to jointly develop advanced quantum solutions18.
Public bodies are also putting their money on quantum. “We are seeing these initiatives not just in UK and US, but in Russia, Japan, China, Canada, Australia,” Chirag Dekate, vice president of artificial intelligence, machine learning and supercomputing at Gartner says. “All of these governments are investing fairly heavily in quantum computing.19“
Not surprisingly, this is pushing up forecasts about the global quantum computing market, which is predicted to jump from $487.4 million in 2024 to $3,728.4 million by 203020. A study by the IDC concluded that the number of organizations dedicating more than 17% of their annual IT budgets for quantum computing will rise from 7% in 2021 to 19% in 202321.
The time could be ripe to invest in quantum computing
There’s a general agreement that much of quantum technology is not yet ready for market use today, with Gartner’s Hype Cycle for Computing Infrastructure for 2021 predicting that it will take at least 10 years before quantum computing reaches the Plateau of Productivity22. However, people excited by recent developments like the public floating of IonQ and Rigetti are considering investing in quantum computing stocks now, in order to be part of this disruptive tech sector from its early beginnings.
For investors who want to invest in quantum computing without risking their money on just one or two nascent stocks, a quantum ETF like Defiance’s QTUM offers a way to spread their exposure to risk across a range of promising stocks involved in quantum, cloud computing, and other transformational computing technologies.
For current performance and holdings, please visit defianceetfs.com/QTUM
1 “IonQ Becomes First Publicly Traded, Pure-Play Quantum Computing Company; Closes Business Combination with dMY Technology Group III” October 1, 2021 https://ionq.com/news/october-01-2021-ionq-listed-on-nyse
2 “Rigetti Computing Announces Plans to Become Publicly Traded via Merger” October 6, 2021 https://www.hpcwire.com/off-the-wire/rigetti-computing-announces-plans-to-become-publiclytraded-via-merger/
3 “Rigetti Computing Announces Plans to Become Publicly Traded via Merger” October 6, 2021
4 “An Early Investor In Twitch Explains Why He’s Betting Big On Quantum Computing” October 31, 2021 https://www.forbes.com/sites/kevindowd/2021/10/31/an-early-investor-in-twitch-explains-why-hes-bettingbig-on–quantum-computing/?sh=58d880c41673
5 “An Early Investor In Twitch Explains Why He’s Betting Big On Quantum Computing” October 31, 2021 https://www.forbes.com/sites/kevindowd/2021/10/31/an-early-investor-in-twitch-explains-whyhes-betting-big-on–quantum-computing/?sh=58d880c41673
6 “UK to build commercially available quantum computer” September 2, 2021 https://www.computerweekly.com/news/252488484/UK-to-build-commercially-availablequantum-computer
7 “Rigetti Computing Announces Plans to Become Publicly Traded via Merger” October 6, 2021 https://www.hpcwire.com/off-the-wire/rigetti-computing-announces-plans-to-become-publicly-traded-viamerger/
8 “Rigetti Awarded Department of Energy Contract to Develop Quantum Simulation for Fusion Energy” November 4, 2021 https://www.globenewswire.com/newsrelease/2021/11/04/2327618/0/en/Rigetti-Awarded-Department-of-Energy-Contract-to-DevelopQuantum-Simulation-for-Fusion-Energy.html
9 “Quantum Computing goes public. How the rise of Quantum Computing companies on the Stock market is creating excitement for the entire industry” October 27, 2021 https://quantumzeitgeist.com/quantum-computing-goes-public-how-the-rise-of-quantumcomputing-companies-on-the-stock-market-is-creating-excitement-for-the-entire-industry/
10 “The Quantum Computer Revolution Is Closer Than You May Think” May 2, 2017 https://quantuminstitute.yale.edu/publications/quantum-computer-revolution-closer-you-maythink
11 “An Early Investor In Twitch Explains Why He’s Betting Big On Quantum Computing” October 31, 2021 https://www.forbes.com/sites/kevindowd/2021/10/31/an-early-investor-in-twitch-explains-whyhes-betting-big-on–quantum-computing/?sh=58d880c41673
12 “ExxonMobil strives to solve complex energy challenges” https://www.ibm.com/casestudies/exxonmobil/
13 “bp joins the IBM Quantum Network to advance use of quantum computing in energy” February 15, 2021 https://newsroom.ibm.com/2021-02-15-bp-joins-the-IBM-Quantum-Networkto-advance-use-of-quantum-computing-in-energy
14 “Quantum computing startups are suddenly raking in millions” October 11, 2021 https://www.techradar.com/news/quantum-computing-startups-are-suddenly-raking-in-millions
15 “Quantum Computing goes public. How the rise of Quantum Computing companies on the Stock market is creating excitement for the entire industry” October 27, 2021 https://quantumzeitgeist.com/quantum-computing-goes-public-how-the-rise-of-quantum-computingcompanies-on-the-stock-market-is-creating-excitement-for-the-entire-industry/
16 “Cambridge Quantum and Honeywell Reach Planned Milestones on way to making Quantum Computing Mainstream” July 23, 2021 https://quantumzeitgeist.com/cambridge-quantum-andhoneywell-reach-planned-milestones-on-way-to-making-quantum-computing-mainstream/
17 “Caltech and Amazon Partner to Create New Hub of Quantum Computing” October 26, 2021 https://www.caltech.edu/about/news/caltech-and-amazon-partner-to-create-new-hub-ofquantum-computing
18 “IBM and the Race to Dominate the Quantum Computing Field” October 14, 2021
19 “Can the UK become a quantum computing world leader?” June 8, 2021 https://techmonitor.ai/technology/uk-quantum-computing-strategy-ibm
20 “Global Quantum Computing Market Size to Grow at a CAGR of 25.40% from 2021 to 2030” August 19, 2021 https://www.globenewswire.com/en/newsrelease/2021/08/19/2283367/0/en/Global-Quantum-Computing-Market-Size-to-Grow-at-aCAGR-of-25-40-from-2021-to-2030.html
21 “Quantum Computing Grows Its Following with Investments and Experiments on the Rise,
According to IDC” May 19, 2021 https://www.idc.com/getdoc.jsp?containerId=prUS47696021
22 “Gartner advises tech leaders to prepare for action as quantum computing spreads” October 21, 2021 https://venturebeat.com/2021/10/21/gartner-advises-tech-leaders-to-prepare-foraction-as-quantum-computing-spreads/
*The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 833.333.9383. Short term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. Market price is the price at which shares in the ETF can be brought or sold on the exchanges during trading hours, while the net asset value (NAV) represents the value of each share’s portion of the fund’s underlying assets and cash at the end of the trading day.