Tech leaders bullish, but investors cautious

While quantum computing's potential for advanced problem solving remains largely unproven, major technology companies remain in the sector and regions are competing for leadership in the field. Universities play a key role in quantum research, driving innovation and the commercialization potential of new technologies. Some cities have more expertise than others. Defense considerations influence government attention and funding, and the United States and China are competing for technology leadership, with the latter gaining the upper hand.

The people selling quantum computing want you to start buying it.

Early proponents of new products and industries often have financial incentives to succeed. This creates a tricky cycle: Are you betting on quantum computing because you believe in the technology, or are you betting on it because you believe in it? Probably both.

So expect quantum enthusiasm from the management of IonQ, a publicly traded, university-based company based in Maryland that is staking its future on rapid developments in quantum computing. The company is one of several vying for authority in this as-yet-unproven advancement.

How do you apply quantum technology to our toughest problems? “So,” IonQ Chief Marketing Officer Margaret Arakawa said at a conference in Chattanooga, Tennessee, in May. As she stood onstage, she added with a polite chuckle: “Get out your credit cards.”

The Economics of Quantum Computing

The quantum industry certainly needs more buyers: More than half of Americans used generative AI last year, but quantum computing is still relatively unknown.

Investors flocked to the digital boom caused by the pandemic, but rising interest rates have hit the speculative quantum industry hard. The quantum industry relies on arcane physics that Einstein famously called “spooky action at a distance.” Why bet on complex science when Treasury bonds offer excellent yields?

Most of the big tech companies and conglomerates see the opportunity as great enough to keep their quantum divisions in business, including IBM, Intel, Google and Microsoft. Honeywell invested $300 million this year in a company called Quantinum, which it merged with in 2021. But it's the independent, publicly traded quantum companies that best represent the perilous fall from the pandemic bubble. At its peak in November 2021, IonQ's stock was trading at nearly $30 a share, but is now below $8.

Canada-based D-Wave Quantum and French company Atos have also performed poorly. Atos is heavily in debt and the French government is rumored to be considering buying what it considers to be strategically important assets of the company.

Quantum is not just one technology. Jonathan Felbinger, Quantum Economy Development Consortium

To understand the importance of this industry, it helps to know the basics. Quantum computing relies on the amazing power of quantum mechanics to process information differently than traditional computers. Quantum bits, or qubits, can exist in multiple states simultaneously, allowing for much higher processing power in certain calculations. In 1994, mathematician Peter Shor published a groundbreaking paper identifying how a theoretical quantum computer could eliminate internet security threats without having to worry about passwords. Dreams of transforming drug discovery and genetic engineering followed, and advances in a variety of fields have been on the horizon.

That sparked a boom in quantum-focused university research.

Founded in 2012, the Pittsburgh Quantum Institute encompasses multiple research fields and institutions, including the prestigious Carnegie Mellon University, which opened its own new quantum research center last fall. The center is supported by the National Science Foundation and is committed to collaborations with government, academia and industry. Johns Hopkins University and the University of Delaware also boast quantum-focused departments that blend science and commerce.

Last year, the University of Pennsylvania launched the Center for Quantum Information, Engineering, Science and Technology (QUIEST), which it calls an interdisciplinary field spanning physics, materials science and information science.

Quantum is not a single technology, Jonathan Felbinger, deputy director of the Washington, DC-based Quantum Economy Development Consortium, told me recently.

After decades of anticipation, Felbinger and other industry advocates are hoping to see quantum research put to practical use, which could also be a reputational and financial win for universities.

While IonQ is a win for the University of Maryland, it's an incomplete victory for the university where the company's co-founder, Christopher Monroe, developed key intellectual property: In 2021, he moved to Duke University, where co-founder Jongsang Kim holds tenure. The two have since left their full-time roles at IonQ to return to academia, a testament to quantum's reliance on university research.

CEO Peter Chapman boasted to Bloomberg last fall: “We have a relationship with Duke University, and the government-funded research being done there is exclusively licensed and made available royalty-free. [IonQ].

The need for national defense

The motto of national defense resonates throughout the industry.

Enthusiasts imagine reliable, efficient quantum computers that could outsmart rival cybersecurity strategies and accelerate other important discoveries, according to the 30-year-old Shaws paper. That claim may be true. It's also good business.

Earlier this year, an industry commentator told me that “the best customer in the world is the federal government,” and the best way to keep the federal government as a customer is to thoroughly scare them.

Policymakers and federal officials are no doubt taking notice: DARPA is funding quantum experiments, and a congressional subcommittee recently called for a military-focused quantum computing laboratory. Last fall, IonQ announced a $25 million contract with the U.S. Air Force Research Laboratory to build two quantum computers. (The variety of architectures makes comparisons difficult, but one study estimated there are fewer than 150 quantum computers in the world, nearly half of which are operated by IBM.)

After IonQ CMO Arakawa gave herself a quantum boost onstage at the conference in May, she was joined onstage by Chief Revenue Officer Rima Alameddine and former U.S. Senator from Tennessee and former Chattanooga Mayor Bob Corker.

Flanked on either side by IonQ executives, Coker played the role of civic advocate: “We want a quantum computer in Chattanooga.”

He and other economic-development leaders are attracted to quantum technology because of its potential to create long-term jobs. Some see it as essential for a competitive advantage. Quantum technology, along with AI, semiconductors and other advanced technologies, has become one of the hottest battlegrounds in the escalating cold war between the U.S. and Chinese governments.

At a quantum-focused session at the Chattanooga conference, a staff member for U.S. Representative Marsha Blackburn put it bluntly: “We view China as the greatest existential threat in many ways. This stance threatens to drive a divide between our two scientific superpowers.”

According to an OECD survey, as of 2021, the number of scientists returning to China has surpassed the number of scientists traveling to the United States, with quantum computing becoming a hot topic. Last year, Chinese researchers set the current record for the number of qubits entangled in a quantum computer, with even higher performance predicted. Chinese researchers are now far ahead of their U.S., Japanese and European counterparts in publishing quantum-related high-impact academic papers.

Note: This trend also applies to AI: According to talent tracking firm MacroPolo, one-third (34%) of Chinese students majoring in AI stayed in China in 2019, and by 2022 that number is approaching two-thirds (58%).

Ion Q executives meet with former Senator Corker in Chattanooga in May 2024. (Kendra Simmons/Simon West Agency)

Where quantum computing is thriving

With quantum computing, commercial feasibility has barely been proven, and few standards have yet been set.

IonQ operates what are called trapped-ion quantum computers, while Google's AI division focuses on superconducting qubits. These and other differences are being worked out in university research labs and corporate laboratories around the world.

To fund their research, many quantum companies are using classical computers to commercialize near-future quantum applications and quantum-inspired tools.

Arakawa, the IonQ CMO, said 90% of the value of a new platform will be captured by the first 10% of industry pioneers. After a generation of boom and bust cycles, Arakawa predicts quantum computing will continue to grow uninterrupted. There will be no winter.

Another industry advocate told me, “We understand the physics and we’re working on the engineering.”

Some are betting that the time is now: The U.S. Economic Development Administration's recently approved Tech Hub program will pump $41 million into quantum computing-focused clusters in Colorado and New Mexico.

It's not the only U.S. region vying for leadership in this field: IonQ is headquartered in College Park, Maryland. Ninety minutes away, in Arlington, Virginia, a hub of satellite technology, it's home to Honeywell-backed Quantinuum's satellite offices and close to DARPA and the Department of Defense. All of this makes a compelling case that the DMV is a quantum leader.

Chattanooga's advocates, including former Sen. Corker, want quantum cachet. The city has the nation's fastest internet, active involvement from industry leaders like Volkswagen, affordable energy run by the Tennessee Valley Authority, and a small but powerful quantum higher education hub at the University of Tennessee at Chattanooga. Chattanooga already boasts “the nation's first commercial quantum network,” run by the power board and Silicon Valley quantum startup Qubitec. The city is also less than two hours away from health care leader Nashville and Oak Ridge National Laboratory, which has a quantum division.

How much real change will these speculations bring about in the near future? The problem with advanced technology is that for the same reason we can't imagine all of its applications, we can't imagine all of its impacts and the obstacles that will get us there.

It's a race for distributed, networked quantum computers, says IonQ CRO Alameddine. “Most quantum computers are still primarily , but they're becoming more consistent. IonQ executives touted the collaboration between Chattanooga, Oak Ridge and Nashville on stage: 'You have the capabilities to make it happen.'”

Given the highly physical nature of quantum, there's a desire to be a leader. To have a global impact, quantum requires getting a tiny part right. “Let's solve local problems first,” IonQ CMO Arakawa said.

In the early days of the consumer internet, companies identified the easiest process to test online, known as “lift and shift,” she said.

But quantum is different, Arakawa says: take the hardest problem, find a small use case, and overcome it.

The biggest problem for quantum advocates may be raising the funds for wider adoption.

Updated at 12:25 p.m. to clarify photo credits from the conference and to note that the EDA Tech Hubs award for quantum computing will go to work in Colorado and New Mexico.

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