The Nasdaq Composite, which holds a number of big-name tech stocks, experienced a bit of selling pressure last week. In particular, the index fell nearly 2%. This potentially creates an opening for savvy investors to buy up shares of stocks that appear undervalued. One growth sector worth looking into would be quantum computing. Most people by now are familiar with generative artificial intelligence (AI) technologies, such as OpenAI’s ChatGPT. This led us to creating this list of undervalued quantum computing stocks.
Generative AI has already begun to change the way people work and consumer information. In a similar vein, quantum computing could very well usher in a similar era of technological innovation. This kind of computing technology relies on quantum mechanics – that is, properties of subatomic to particles – to calculate complex problems that classical computers have a hard time solving. Some of these problems include weather prediction and optimization problems. While quantum computing remains in its nascent phases, there are a number of public companies that have made significant contributions to field and are also trading at attractive valuations.
Below are three of them.
Undervalued Quantum Computing Stocks: International Business Machines (IBM)
International Business Machines (NYSE:IBM) is a legacy technology behemoth that started working on quantum computers in the early 2000s. The company has continued to innovate in the field since then. In 2019, IBM released the Q System One, which was a fully-integrated quantum computing system that the company had said was ready for both commercial and scientific use. Though the “commercial use” of the quantum computing system may had been an overstatement, the Q System One definitely served as a stepping-stone for the entire sector.
Towards the end of 2023, IBM unveiled the Q System Two, the firm’s “first modular quantum computer” that operate with three IBM Heron processors. Each of these processors are innovations in their own right, relying on 133 qubits. Outside of the hardware realm of quantum computing, IBM has also contributed to the software side of the space. The software stack Qiskit Patterns will allow quantum developers to easily create code for quantum computing purposes, while “watsonx” will leverage generative AI to facilitate the writing of quantum computer programs.
IBM’s stock trades at 16.9x forward earnings, making it cheaper than a lot of the tech giants out there. More achievements in the field of quantum computing could create opportunities for multiple expansion for investors who decide to buy in now.
Intel (INTC)
Intel (NASDAQ:INTC) has received much scrutiny over the years. Once a crown-jewel of the American semiconductor industry, the chipmaker has fallen behind rivals Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) in both the CPU and GPU computing chip verticals. Intel does, however, appear to have an innovative edge in terms of quantum computing. At the beginning of May, Intel unveiled cutting-edge research that could lead to the “scaling of silicon-based quantum processors,” which would be a major step in developing “fault-tolerant” quantum computers. These computational systems would be able to perform calculations with very low error rates.
Intel’s Tunnel Falls chip is also an important achievement in the broader space. Released to the research community, Tunnel Falls and its advanced silicon features will help edge the chipmaker further to developing a viable and commercial quantum computer.
Intel’s share price trades at around 24.4x forward earnings, which makes it relatively cheaper to its chip competitors, Nvidia and AMD. As Intel ramps up its manufacturing capabilities, it will definitely be a stock to watch in terms of AI and quantum computing innovations. This is easily one of the most undervalued quantum computing stocks.
Honeywell (HON)
Honeywell (NASDAQ:HON) is an industrial conglomerate that operates in the aerospace and defense industry. The firm’s “Aerospace” division, for example, develops power units, propulsion engines, electric power systems as well as engine controls, flight safety and navigation hardware. What is lesser known is Honeywell’s investments into the quantum computing space. As I have written in a previous article, Honeywell’s serious entry into the quantum computing space came through the formation of Quantinuum , which had been a merger between Honeywell Quantum Solutions and Cambridge Quantum in 2021.
Honeywell maintains majority ownership of Quantinuum and through this new business, Honeywell has been able to continue innovating in the space. Quantinuum’s System Model H1 is the startup’s first-generation quantum computing system. Leveraging Honeywell’s proprietary technology and research, the quantum system features 20 qubits. Similar to other quantum computing systems, researchers can harness its power via a cloud environment like Azure Quantum.
Honeywell’s share price trades at 20.0x forward earnings. As quantum computing becomes commercially viable, there’s not much doubt in my mind that Honeywell will be able to reap the benefits. If you are looking for undervalued quantum computing stocks, start here.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.