25th Mar 2021
Special Purpose Acquisition Companies (SPACs) help innovative companies at the cutting edge of next generation technologies, go public. From commercial space travel to sports betting to air taxis, they are often involved in financing companies with big ideas and developing nascent technology.
This makes the recent announcement of SPAC dMY Technology Group III’s merger with quantum computing company IonQ, big news for those investing in next gen computing and machine learning etfs. dMY began trading in November 2020 by offering 27,500,000 share units for $10 each to raise $275m. The latest deal brings $650m of capital (including accompanying PIPE cash) to IonQ and makes it the first pure-play quantum computing company to be listed on the stock exchange. It marks a moment towards the mainstreaming of a technology that till not so long ago was considered an academic curiosity, a move from the lab to the digital economy.
Quantum computing seeks to exploit the physical phenomena of superposition, entanglement, and interference that occur at the subatomic level, to store and manipulate information in devices called qubits. In contrast to bits (short for binary digits, which can be either 0 or 1), qubits can exist in multiple distinct states simultaneously (imagine 0 and 1 at the same time). Their states can be described only probabilistically using complex numbers. Quantum Computers (QCs) use linear algebra to manipulate matrices of complex numbers and unlike classical computers that must consider possibilities one at a time, they can consider all outcomes at the same time. This fundamentally different mechanism means that QCs have the potential to process data or perform calculations exponentially faster than even the most powerful supercomputer.
The snagging point has been the fragility of the qubits, which are highly sensitive to electrical, magnetic and thermal “noise”. Until now they have required their own room and extremely cold temperatures to ensure proper operational conditions. This has presented a barrier to mass marketing, with the only commercially available D-wave QC housed in a 10 foot tall container. Many major companies such as IBM and Microsoft have opted to develop QC access via the cloud, to promote the use and spread of the technology despite its limited scope for relocation.
IonQ have pursued a different strategy however. In parallel to cloud access for twenty million software developers (IonQ is the only QC company to be available on both Amazon Web Services and Microsoft Azure), it is developing a scalable, commercial-grade quantum computer. The idea, reported IonQ chief executive and former director of engineering for Amazon Prime, Peter Chapman, is to manufacture a QC that works at room temperature and is about the size of an Xbox.1 dMY’s co-head Niccolo de Masi, formerly chief executive of videogame company Glu Mobile Inc., cited IonQ’s excellent human resources as a major component in his conviction that the company could realize its projected market opportunity of $65 billion by 2030.2 In addition to Chapman, IonQ recently hired Dave Bacon, former head of Google’s QC software, as vice president of software.
The transformative potential of greater availability of QCs is hard to overestimate. Quantum supremacy (or even quantum advantage) – the point at which QCs facilitate computing power that is significantly greater than traditional computers – will support radical advances in machine learning (ML), a subset of Artificial Intelligence. ML describes the process of a computer looking at patterns, asserting a hypothesis, testing those conclusions and then improving its hypothesis. The power of QC to consider thousands of possibilities at once unlocks the potential in ML for dramatic developments in finance, risk management, cybersecurity, materials science, energy, and logistics. These fields are most ripe for the next gen computational improvements in simulation, optimization and sampling, that QC and ML could bring. But other use-cases could also develop once the tech becomes more mainstream – driverless cars and robotic personal assistants could be plucked from the scifi movies as affordable quantum processing propels sophisticated levels of machine learning to commercial viability.
IonQ are not alone in this endeavor. Though they claim that their quantum system is 32,000 times more powerful than competitors, there are others working to commercialize access to QCs. They include International Business Machines Corp., Honeywell International, Microsoft Corp., Google and D-Wave Systems Inc. dMY’s announced merger with IonQ, together with the $350m of investment from Hyundai Motor Co., Breakthrough Energy Ventures (led by Bill Gates) and others, sends a strong signal of the perceived future growth potential in this sector. This coheres with a survey of over 1,600 business owners, decision makers, and tech leaders, of whom 74% considered ML a game changer, with the potential to transform their job and industry.3 In the context of predictions that the global ML market could grow to $8.81bn by 2022, investors looking for disruptive potential should consider a machine learning etf.
Click here to view the current holdings for QTUM.
1 “Quantum-Computing Startup IonQ Plans Public Debut in $2 Billion SPAC Merger,” Sara Castellanos, Wall Street Journal, March 8, 2021.
2 “First Pure-Play Quantum Computing Company Comes Public: What Investors Should Know About IonQ,” Chris Katje, March 8, 2021. https://finance.yahoo.com/news/first-pure-play-quantum-computing-143012704.html?guccounter=1&guce_referrer=aHR0cHM6Ly9zZWFyY2gueWFob28uY29tLw&guce_referrer_sig=AQAAAAUAAtPi0cxakdS_oM_Kor8CAIQPV87GG5U_Fu_6U3iABDEre6pVj1MUTMqOweKCkUwHLANzgAKkNuVO9y9e-V2dF3RPr7D6WzKXS9HRXTBEXP47-t5WTmJbZQqgBgfK0TDEmCoPAA45-C1qwH2FZfCX3bOw9ROjnuZ1qoSpwcwr
3 “The Top 9 Machine Learning Use Cases in Business,” March 13, 2019. https://squadex.com/insights/top-machine-learning-use-cases-business/