How to Invest in Wall Street's Favorite Quantum Computing Stocks

Amid all of the euphoria surrounding artificial intelligence (AI), quantum computing has stayed largely out of the spotlight this year - despite ambitious forecasts for the market size to surge from $1.2 billion in 2024 to $12.6 billion by 2032. In the same vein, this report by consulting giant McKinsey forecasts that sectors like chemicals, life sciences, finance, and mobility could witness gains of up to $2 trillion by 2035 due to quantum computing advances. 

However, a recent major development in the industry - the launch of tech giant Google's (GOOGL) new quantum computing chip, Willow - suddenly has Wall Street buzzing about the bullish prospects for quantum computing stocks.

Developed at the company’s quantum lab in Santa Barbara, Willow was able to solve a complex mathematical problem in just five minutes - a task that would take classical computers longer than the history of the universe. It reduces errors exponentially as it scales up its qubits, a feat that no previous system has come close to accomplishing.

But what are qubits? And for that matter what is quantum computing - and why is it gaining so much prominence now? Let's try and answer that question.

About Quantum Computing

Quantum computing, an advanced realm of technology most familiar to the general public thanks to science fiction movies, finds applications in various domains. Leveraging principles of quantum physics and computer science, the cutting-edge tech has use cases across cryptography; drug discovery and material science; AI and machine learning; and climate modelling and sustainability, to name a few. 

What makes quantum computing so powerful is the use of "qubits," as opposed to the standard “bits” used in computing. While bits can represent only a single binary value of 0 or 1, qubits are special because they can represent 0, 1, or both at the same time, thanks to a phenomenon called superposition. This allows quantum computers to explore many possibilities simultaneously, making them incredibly powerful for solving certain types of problems.

Now that we have an idea about the technology, how can we as investors take advantage? Investing in stocks from the group can be fraught with risks, as it can be an arduous task to differentiate between the contenders and the pretenders in this emerging space.

And here is where the Defiance Quantum ETF (QTUM) comes in.

Defiance Quantum ETF

Launched in September 2018, the Defiance Quantum ETF is an exchange-traded fund (ETF) that tracks the BlueStar Quantum Computing and Machine Learning Index, comprised of equity securities of leading global companies engaged in the research, development, or commercialization of systems and materials used in quantum computing, advanced traditional computing hardware, high-powered computing data connectivity solutions, cooling systems, and companies specializing in the perception, collection, and management of heterogeneous big data used in machine learning.

Shares of the ETF have outperformed both the S&P 500 Index ($SPX) and the Nasdaq Composite ($NASX) this year, rallying 59% on a YTD basis. 

The ETF's assets under management (AUM) stand at $397.8 million, with a competitive management fee of 0.4%. While QTUM's focus is primarily on growth, the fund also distributes quarterly dividends, at a current yield of 0.59%.

With an average volume of about 426,000 shares, the ETF offers healthy liquidity for most retail traders looking to enter and exit positions - and its popularity is growing fast, with today's volume topping 1 million shares. 

QTUM is heavily skewed toward more speculative growth plays in the quantum computing space. The fund's top five holdings by weight are Rigetti Computing (RGTI) (12.66%), D-wave Quantum (QBTS) (10.77%), IonQ (IONQ) (5.75%), MicroStrategy (MSTR) (2.78%), and Marvell Technology (MRVL) (1.60%). 

Larger-cap quantum computing stocks are also represented, with Alphabet (GOOGL), IBM (IBM), Honeywell (HON), Microsoft (MSFT), and Nvidia (NVDA) all accounted for at weights between 1.00% and 1.40% of QTUM's portfolio.

Final Take

All things considered, investors seeking exposure to the exciting quantum computing space can consider the Defiance Quantum ETF, which offers diversified exposure to high-growth companies and legacy tech giants within the sector - making it a strategic choice for those in search of long-term capital appreciation in this emerging, transformative industry.