IBM's stock has missed the quantum rally but could still be your ticket to ride that hot trend

MW IBM's stock has missed the quantum rally but could still be your ticket to ride that hot trend

By Steve Gelsi

Melius Research analyst Ben Reitzes says IBM's quantum computing practice dates back to the 1980s

Wall Street's enthusiasm around quantum computing as the next hot investment theme after artificial intelligence has so far not included IBM. That's a mistake, Melius Research analyst Ben Reitzes said Wednesday.

While Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$ has gotten a share-price boost along with a select group other names, such as Quantum Computing Inc. (QUBT), Rigetti Computing Inc. (RGTI), D-Wave Quantum Inc. $(QBTS)$ and IonQ Inc. $(IONQ)$, IBM's stock has been overlooked, Reitzes said.

IBM's stock has risen just 4% in the fourth quarter. Meanwhile, Alphabet is up 17% after the company announced progress in quantum computing with its Willow processor earlier this month. That triggered a rally in stocks such as Quantum Computing.

"No one's talking about IBM Quantum," Reitzes observed in a research note. "Quantum stocks are rocketing higher. IBM seems to have more meat on the bone in quantum than anyone [over the] long term, even Google."

Reitzes reiterated a buy rating on IBM and said the technology giant's stock is worth about $255 - it closed Tuesday at $228.97 - but over time its quantum-computing experience offers an "added bonus."

Since the 1980s, he said, IBM has been a pioneer in quantum computing, which uses tiny pieces of data called qubits. These qubits allow for faster processing because they can represent both 0 and 1 at the same time.

"We forecast quantum could result in multiple billions of dollars in revenues and profits in the 2030s for IBM with a 'best guess' at materiality in 2029," Reitzes said.

IBM will likely sell quantum computing as a hosted service along with its technical and consulting practices, he said. One potential application would be to protect the security of crypto currencies, he said.

IBM is expected to provide more details on its plans for quantum computing at an analyst day on Feb. 4.

"Perhaps with IBM's assistance, quantum will help cure cancer of help us live on Mars," Reitzes said.

Also read: Honeywell's quantum-computing business could be worth $20 billion

-Steve Gelsi

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December 18, 2024 08:15 ET (13:15 GMT)

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