Alphabet

What it does: Alphabet is the parent company of Google and a diversified technology giant with quantum ambitions.

By Dr James Fox. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Google’s quantum ambitions have taken a leap forward with the unveiling of the Willow quantum chip in late 2024. This breakthrough device can perform complex calculations exponentially faster than classical supercomputers, completing tasks in minutes that would take traditional systems septillions of years. 

Google aims to demonstrate the first “useful, beyond-classical” computation and ultimately build a large-scale quantum computer capable of tackling real-world applications. Based on publicly shared progress reports, Google seems to have a lead in the area. 

Looking at the company’s valuation, the price appears reasonable with a forward price-to-earnings ratio of 24.1 times, slightly below its five-year average. Key risks include regulatory issues, particularly the Department of Justice’s demand to split off Chrome, which could impact Android revenues. Additionally, AI competition and shifts in search behavior pose threats to Google’s core business. 

Nonetheless, Google’s strong balance sheet supports continued investments in cloud, AI and quantum technologies. And the company’s quantum computing breakthroughs, if successfully commercialized, could provide a significant competitive advantage in the long term.

Dr James Fox does not own shares in Alphabet.

Alphabet 

What it does: The owner of Google and YouTube, Alphabet is one of the largest technology companies in the world. 

By Edward Sheldon, CFA. There are a number of S&P 500 companies that offer exposure to quantum computing. Personally, I like Alphabet for exposure to the theme as it has been working on the technology for over a decade now.  

Late in 2024, Alphabet announced the arrival of ‘Willow’ – the company’s latest quantum chip. And this looks very exciting. 

With this chip, it only takes five minutes to perform a calculation that would take one of today’s fastest supercomputers 10 septillion years (10,000,000,000,000,000,000,000,000 years) to compute. So, it’s incredibly powerful. 

Meanwhile, the chip can reduce errors exponentially as ‘qubits’ are scaled up. This cracks a key challenge in quantum computing that has plagued the field for decades. 

Of course, there are no guarantees that Alphabet will go on to be a winner in the quantum computing industry. There are also no guarantees that quantum computing itself will go mainstream. 

Alphabet offers exposure to many other areas of technology though. So, I see it as a relatively safe play on the theme. 

Edward Sheldon owns shares in Alphabet. 

Alphabet

What it does: Alphabet is an innovative technology company driving AI, search, cloud and quantum advancements.

By Paul Summers: It will take quite a while before quantum computing becomes commercially viable. For this reason, picking out the likely ‘winners’ in 2025 is difficult. But I think Google-owner Alphabet stands a good chance of being among them.

The incredibly cash-rich tech titan had another great year in 2024, significantly outperforming the S&P 500 index. Quite a lot of this extra uplift came in December, following the unveiling of its Willow chip and its ability to handle seriously complex computations that classical computers can’t manage. In time, this could support areas as disparate as drug discovery, financial modelling and logistics.

Of course, investors may experience a rollercoaster ride before then as technology stocks drop in and out of fashion. Alphabet can also expect to face increasing competition as other firms vie for a piece of the quantum pie.

But I’d be surprised if Alphabet’s best days were behind it.

Paul Summers has no position in Alphabet

Honeywell

What it does: Honeywell is a multinational conglomerate working in aerospace, automation, security and sustainable energy.

By Mark Hartley. Honeywell (NASDAQ: HON) is a $142bn corporation with revenue of $36.6bn and income of $7.15bn (2023). It produces everything from aircraft engines and flight tools to safety sensors and smart building automation.

It’s enthusiastic about quantum computing, believing it to have significant applications in improving safety, increasing efficiency and accelerating research and development. In particular, the ability to optimise predictive analytics, run simulations and build quantum encryption is attractive.

In partnership with Cambridge Quantum Computing, it formed the company Quantinuum to build quantum systems using trapped-ion technology, known for its high accuracy and scalability.

However, quantum is nascent technology the benefits of which are yet to be proven. If the projects fail to bear fruit, it could lead to significant losses. What’s more, it’s reliant on the success of its partnership. Recent news suggests it may split its business between aerospace and automation although nothing is confirmed.

Mark Hartley does not own shares in Honeywell.

Microsoft

What it does: Microsoft is one of the S&P’s ‘Magnificent Seven’ stocks and a powerhouse in information technology.

It is a leading light in a multitude of tech segments including artificial intelligence (AI), productivity software and gaming. And through its Azure Quantum platform, Microsoft (NASDAQ:MSFT) is hoping to pioneer the new generation of ultra-fast and powerful computing.

Pleasingly, it’s been making huge strides here in recent times.

It made headlines back in September when — alongside quantum specialist Quantinuum — it created and entangled 12 highly reliable logical qubits. According to Microsoft, this was “the largest number of entangled logical qubits, with the highest fidelity, on record.”

In simple terms, logical qubits are essential for error reduction and better stability in quantum systems.

Microsoft’s since broken that record, and in November announced it would launch a quantum machine with Atom Computing that features 24 logical qubits. It’s taking orders for these systems, with delivery scheduled for later this year.

These are early days, and development setbacks later on could hamper Microsoft’s ambitious plans. But recent progress is highly encouraging.

Royston Wild does not own shares in Microsoft.

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