Alphabet's Quantum Computing Chip Possibly Revolutionizing the Stock Market's Dynamics
Alphabet's Quantum Computing Chip Possibly Revolutionizing the Stock Market's Dynamics
Google's (GOOGL 1.25%, GOOG 1.31%) shares received a boost following the unveiling of their new quantum computing chip named Willow. The company's stock had been lagging in the second half of the year after reaching its peak in July, but this revelation propelled it back to record highs. As of now, the stock has gained approximately 38% year-to-date.
Let's delve into the news and assess whether this new quantum computing chip could revolutionize the stock's future.
Quantum Leap
Alphabet's latest creation, Willow, is being promoted as a significant advancement in quantum computing, a cutting-edge technology that exploits quantum mechanics principles to solve problems at an unprecedented speed compared to classical computers.
Unlike traditional computers that process data using bits (limited to either 0 or 1), quantum computers utilize quantum bits or qubits, which exist in a state of superposition, theoretically representing multiple values simultaneously. The superposition property allows quantum algorithms to process data at an exponentially faster rate than modern computers.
According to Alphabet's announcement, the chip could solve a problem that would take a classical computer an astronomical 10 sextillion (10,000,000,000,000,000,000,000,000) years to process.
Quantum computers operate with a level of complexity, as they tend to generate errors, particularly with an increasing number of qubits. Alphabet seems to address this problem with their "below threshold" technology, in which the chip's performance improves as it incorporates more qubits, leading to a reduction in errors.
Willow contains 105 qubits and is a testament to the company's ability to reduce errors at scale in this fledgling technology.
Despite its breakthrough, quantum computing is yet to find real-world applications. Alphabet has been working on the project for 12 years, but many experts believe that its commercial use is still far from reach. The head of Google's Quantum AI lab told the BBC that we should not expect quantum chips to be ready for commercial purposes before the end of the decade, while other specialists put the timeline even further, at around 10 years.
Why is Willow a Game Changer for Alphabet's Stock?
Although the Willow chip or quantum computing itself won't significantly impact Alphabet's earnings in the short term, the announcement was a critical milestone for the company and its stock.
The announcement emphasizes Alphabet's position as a leader in the development of what could potentially be the next groundbreaking technology after artificial intelligence (AI). AI was once considered a futuristic idea, but the arrival of ChatGPT thrust it into the limelight, transforming it into a substantial revenue driver for numerous enterprises.
While actual use-cases for quantum computing are years away, Alphabet appears to be leading the pack in this space. Ultimately, quantum computing could have transformative impacts on various industries, including AI, cybersecurity, and even cryptocurrencies like Bitcoin.
What matters most to Alphabet and its investors today is that its role as an innovator has been reinforced. The long-standing narrative of Alphabet lagging behind in innovation has been challenged by the company's success in addressing a critical roadblock in quantum computing research.
Presently, an investment in Alphabet offers investors the world's top search engine, a dominant advertising network, one of the major three cloud computing providers, a highly profitable streaming platform (YouTube), along with promising investments in self-driving cars (Waymo) and quantum computing. This mix of established and emerging businesses represents a compelling investment opportunity.
Furthermore, at its current price, Alphabet is one of the most affordable "megatech" stocks, with a forward price-to-earnings ratio (P/E) of below 21.5.
Although the fundamentals of Alphabet will remain unchanged due to Willow, the company's leadership in innovation has been reinforced. Even with the recent rally, the stock appears to remain an appealing option for investors to consider purchasing.
The news of Alphabet's quantum computing breakthrough with the Willow chip could attract investors interested in finance and technology, as it positions Alphabet as a leader in the development of the next major technology after artificial intelligence. This leadership in quantum computing could potentially lead to significant impacts on various industries in the future, making Alphabet's stock an appealing investment opportunity with a relatively low forward price-to-earnings ratio.
As Alphabet continues to invest in quantum computing and reduces errors at scale, this cutting-edge technology could provide a source of additional revenue and growth for the company, increasing the potential return on investment for those who decide to invest in Alphabet's stocks.