These companies are building technology that has the potential to exceed the capabilities of today's AI.
Although the field of artificial intelligence is still in its infancy, several companies are already working on technologies that will underpin the future of AI. These companies are developing quantum computing systems that can process vast amounts of data in seconds that traditional computers would take decades to process.
Quantum machines can perform multiple calculations simultaneously, reducing processing time, whereas typical computers must process data linearly. This means quantum systems will advance AI beyond the capabilities of the most powerful supercomputers, allowing AI to drive cars and find cures for diseases.
Three businesses developing quantum computing technology are achieving impressive results.they are microsoft (MSFT -0.18%), international business machine (IBM 0.04%)and ion Q (IONQ 0.80%). Here's a look at how we're developing technology that can power the next stage of AI.
Microsoft's many strengths
Microsoft may be known for its ubiquitous Windows computer systems, but it has invested billions of dollars in artificial intelligence, including OpenAI, which helped launch the current wave of AI with ChatGPT.
Microsoft's efforts in quantum computing will power future AI systems. The company started building quantum machines in 2006 and is developing a new type of quantum bit (qubit for short) that is similar to the bits in a traditional computer. All quantum computers use subatomic particles to perform calculations measured in qubits.
In April, Microsoft announced a breakthrough in quantum computing that improved error rates by 800 times. Because elementary particles are highly unstable, they are prone to computational errors.
Microsoft says its error rate achievement represents the most reliable qubit on record. This is an important step toward producing quantum computers that can enable next-generation AI.
Additionally, Microsoft's financial strength gives it an advantage in this area. The company has built one of the world's largest cloud computing businesses, generating $61.9 billion in the fiscal third quarter that ended March 31, a 17% year-over-year increase in revenue.
As a result, the company generated strong third-quarter fiscal free cash flow (FCF) of $21 billion, up 18% year-over-year. Microsoft can use its massive FCF to accelerate investments in quantum computing.
IBM's quantum computing success
IBM's work in AI dates back to the 1950s. Currently, the company is focusing on his AI. So it makes sense to invest in quantum systems as well.
In fact, IBM is considered one of the leaders in quantum computing. His company was the first to make quantum computers available in the cloud in 2016. Since then, Big Blue has introduced over 80 of his quantum systems.
For example, IBM partnered with the Cleveland Clinic to provide AI and implement the first quantum computer touted exclusively for medical research. And last December, IBM released the first quantum computer with a 1,000-qubit processor.
Big Blue can fund quantum computing research because its FCF generation is reliable. This not only funds business investments, but also funds the company's generous dividend, which currently yields around 4%.
In the first quarter, the company generated FCF of $1.9 billion, up 43% year over year. IBM expects FCF to be approximately $12 billion in 2024, allowing Big Blue to continue funding its quantum computing business.
As an investment, IBM is more of an income stock than a fast-growing tech stock. First-quarter revenue of $14.5 billion grew only 1% year-over-year due to weakness in consulting and infrastructure businesses.
But its software division, which includes AI and quantum computing sales, is doing well. The division's first quarter revenue was $5.9 billion, an increase of 5.5% compared to 2023.
Rapid growth of IonQ
Startup IonQ is a relatively new company, having been founded in 2015. The company is also the only pure quantum computing company on this list, meaning the company's resources are fully focused on this technology.
Despite its short history, IonQ has amassed an impressive customer list.Clients include: hyundaiOak Ridge National Laboratory, which uses IonQ's technology to build self-driving cars, plans to use IonQ's quantum systems to improve the U.S. power grid.
Such success led the company to first-quarter revenue of $7.6 million, an increase of 77% year-over-year. IonQ expects him to make at least another $7.6 million in the second quarter, up from $5.5 million in 2023.
The company says it has achieved its latest quantum technology milestone a year ahead of schedule, setting the stage for reaching a tipping point in 2025 when “classical computers will no longer be able to fully simulate the IonQ system.” .
As IonQ, IBM, and Microsoft build the technology that will enable the next stage of AI, now is a good time to consider buying stock in these quantum computing giants.
