Quantum Computing: What Investors Need to Know - Morningstar
Summarize this article with:
Please note that data may shift between report updates. Please visit Morningstar.com for the most recent data as well as breaking news content. Quantum computing often sounds like science fiction. With talk of "qubits," "entanglement," and "superposition," it’s easy to get lost in the physics and miss the financial picture. But for investors, the noise surrounding this technology hides a crucial signal: we are witnessing the birth of a new computing era. While the technology is complex, the investment thesis doesn't have to be. This blog breaks down the current state of the industry, assessing when this technology will be ready for prime time and where the real opportunities lie. You can read the complete Quantum Computing Technology Observer report here. The revenue potential here is buzzing for a reason. Quantum computing isn't just a faster version of the laptop on your desk; it is a fundamental reimagining of how we process information. This shift has the potential to impact enormous areas of the global economy. The industries most likely to be affected first—such as pharmaceuticals, chemicals, and finance—generate approximately $36 trillion in annual revenue. Even a tiny efficiency gain in these sectors translates to massive value. According to our analysis, if these industries allocate just a fraction of their R&D budgets to quantum solutions, the market for quantum computing could hit approximately $200 billion annually at maturity. If you are looking for rapid returns in the next 12 months, quantum computing might not be the right sector. The road to commercialization is long, and we need to be realistic about the timeline. Currently, the technology is still in its infancy. The total revenue generated in the quantum computing space was close to just $400 million in 2024. However, projections suggest a massive ramp-up is coming. McKinsey projects between $900 billion to $2 trillion in value added by 2035. We expect early commercialization—where companies start paying for quantum services to solve real problems—is at least 5 to 10 years away. General-use quantum computers that can handle a broad range of tasks are likely 20 years out. The competitive landscape is crowded, but clear leaders are emerging. More than 100 discrete companies are currently developing quantum computer hardware, software, or services. However, not all of them will survive the journey to commercialization. We view the "platform model"—similar to how cloud computing works today—as the likely winner. Building and maintaining a quantum computer is incredibly expensive and technically difficult. It makes sense that the companies with the deepest pockets and existing cloud infrastructure have a massive advantage. IBM stands out as the clear leader today. They have secured $1 billion in cumulative quantum signings since Q1 2017, demonstrating real commercial traction. Alongside IBM, hyperscalers like Alphabet (Google) and Microsoft are well-positioned. They have the financial resources to sustain years of R&D and the cloud platforms to deliver quantum services to customers. They also already have an array of quantum services available in their cloud platforms. Source: Company releases, Morningstar. Note: rQOPS = reliable quantum operations per second. For investors, this suggests that betting on established players with strong balance sheets may be safer than chasing small, pure-play startups that might run out of cash before the technology matures. Before we see widespread adoption, the industry must overcome significant engineering hurdles. It's not just about building a computer; it's about building a stable ecosystem around it. Using an adapted technology readiness level framework from NASA, quantum computing currently sits at level four. This means it is still firmly in the experimental phase. While general-purpose quantum computers are years away, specialized applications will arrive sooner. These early wins will likely happen in optimization, simulation, and encryption. For example, in agriculture, quantum computing could help design better fertilizers, potentially reducing water and fertilizer usage by up to 25%. In pharmaceuticals, it could simulate molecular interactions to speed up drug discovery. In finance, it could optimize portfolios in seconds rather than hours. Quantum computing represents one of the most exciting technological frontiers of our time. It promises to unlock value across the global economy, from smarter agriculture to breakthrough drugs. However, for investors, the key is patience. The path to a $200 billion market is paved with technical challenges and long development cycles. The smartest play today is likely focusing on the "picks and shovels" of this gold rush: the large, well-capitalized companies building the platforms that will power the quantum future. By keeping a long-term perspective and watching the development of key players like IBM, Alphabet, and Microsoft, investors can position themselves to capture the value of this transformative technology when it finally arrives. These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information. These cookies enable the website to provide enhanced functionality and personalisation. They may be set by us or by third-party providers whose services we have added to our pages. If you do not allow these cookies then some or all of these services may not function properly. These cookies allow us to count visits and traffic sources, so we can measure and improve the performance of our site. They help us know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies, we will not know when you have visited our site. These cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.