As tech booms, are we in a Quantum Bubble?

Are we reliving the dot-com boom of the late 90’s which ended up seeing the downfall of a number of fledgling companies such as Pets.com? Out of that wreckage we saw plenty of wealth creation with companies such as Amazon and Google that have continued to innovate and provide many of the services we use today. Are we now facing the same issue of heady tech company valuations that are bleeding over into the Quantum Technology sector?

Deep Technology with Quantum Computing

Quantum Computing is perhaps the hottest deep technology around that could be truly transformative to many sectors and that brings great opportunities for investors. quantum holds the allure that some special calculations could run faster on a quantum computer than classical machines that we use. However the quantum field is rather looking for a “Killer Application“. Rather like perhaps the early days of the world wide web or the internet where innovation after innovation led to the products and tools we take for granted such as searching, streaming and browsing – but it wasn’t always this way. In the technological past people navigated to sites using domain names and human curated search engines such as Yahoo. Search might have been one of the early Killer Applications that made the internet and the web sitting on top of the internet truly transformative. Readers will know we focus on developments from the Quantum landscape and we see plenty of funding behind the quantum sector. All as it seems without a real “use-case”, that said the putative benefits of Quantum Computing are starting emerge and we are at the cusp of seeing something called “Quantum Advantage” where there are tangible benefits to using Quantum technologies in specific cases. The tantalizing promise to speed-up every classical computation is a misnomer. Only specific calculations or computations are amenable or can run faster on Quantum devices compared to classical. Some of the algorithms you may have heard of such as Shor’s or Grover’s algorithm offer the promise of being able to factorize numbers and perform searches faster than existing known classical algorithms. But even these algorithms (there are more) would be reason enough to explore Quantum Computing. However these are applications many would argue are somewhat further away from “prime-time”. What is more interesting to many businesses is the nearer term applications that do not necessarily offer run-time advantages – that is running faster, but perhaps better. Some researchers are exploring how Neural Networks might be better is they used Quantum elements – faster to train and allow for more complex patterns. This new field emerging of Quantum Machine Learning is promising to bridge the gap between the headline statements of quantum making current encryption systems obsolete (Shor’s Algorithm). With the huge benefits that Deep Learning has offered a range of fields from Self driving auto’s to facial recognition,might we see the same with Quantum technologies?

Deep Tech or Deep Pockets

Unlike nearer term investments, Quantum investments are typically at the very early stage. Add to that the fact that we are at the very early beginnings of hardware development – there are still many competing technologies for the “Qubit”. The Qubit is the quantum equivalent of the bit allowing for the curious quantum behaviour that promises to revolutionize the way we think about computation. IBM Quantum are sporting qubits that are superconducting, Intel are working on semiconducting qubits, Xanadu are working with light (photonics) and Honeywell are working on Ion Trap technologies. Fundamentally working in very different ways, but all serve the purpose of creating Quantum Bits – the Qubit which can then be manipulated by software and programmed. Analogously with the digital computer there were alternatives just before (anyone for analogue?) but it wasn’t until the Integrated Circuit (IC) that things really took off. Quantum in terms of development does feel rather like those days transitioning from valves to transistors (and other technologies such Dekatron), while the world wants the Quantum equivalent of Google. Those consumer developments may come, it may just take a few years. Now there is a pattern, a historical trajectory, many will see the natural evolution to the development of Quantum Computing. Who will be the next Intel or AMD or NVIDIA? Who will create the Quantum Operating system or middle ware that controls the hardware like in the classical machine days (DOS, Windows, OS/2, Linux) and who will be writing the applications or frameworks that use the system (ala Facebook, Google, Yahoo)? Are we too early?

Some have spoken about the bubble in the wider technology market and as investors look for more returns could Quantum turn out to be a target? After all investing in what could be the next Intel or the next Google could turn millions into billions and be potentially life changing. Who wants to miss out on the next Intel or NVIDIA or Amazon? Figure out how to build reliable qubits and scale, sort out the temperature issues and Quantum Computing could be ubiquitous. Recent stock valuations to many look heady as many stocks are reaching “AH’s” or All-Time Highs. Whether we are in an actual bubble, only time will tell, but if articles written about technology are anything to go by – the jury is still out. However the familiar Price-Earnings ratio of many stocks such as Amazon, Google are hitting highs. For example, the P/E (Price Earnings) ratio of Amazon is around 90. This is approximately four to five times more than many other business such as P&G at approx 25. A lot of tech is still rather high in terms of valuations. Maybe this time it will be different?

Quantum Clouds

Unlike the PC revolution and the microcomputer revolution, Quantum machines will for the foreseeable future remain devices that live in laboratories and take up vast spaces and require specialist equipment. Reminiscence and drawing on parallels of the early days of computing, might be leading some to extrapolate that one day quantum computers will be ubiquitous and embedded into every area of our lives. This may or not be reality or even required as we are all headed towards the cloud for our computational needs. Analogies aside from the early days of classical, the cloud is enabling many to have exposure to Quantum Devices with no upfront cost or need to build anything in a lab, deal with cryogenics, lasers or special materials. The Quantum cloud will put quantum computing at the fingertips of the masses, who many think will eventually find the use-cases and solve some of the current problems. The thinking is that more eye-balls will lead to more problem solving, akin to open source developments where thousands of volunteers look at, refine and develop software to improve it.

It’s been over four years since IBM released its ‘Q’ service to allow users access to its quantum machine (which looks rather like a steam punk chandelier). Steadily the number of Qubits has increased and the tooling around the platform has also improved and become slicker and more refined. It’s as easy to run a quantum circuit on the cloud as it is any other program. Amazon is also in the race with it’s Bra-Ket service which enables Quantum Hardware providers to expose their services. More and more Quantum Hardware providers are exposing their services via the cloud. Very much on trend with the wider community as barely any businesses would choose to run services on their own hardware and servers. The cloud will be the acceleration medium for Quantum Computing.

Quantum Start-ups

So what is happening in the start-up scene? We track many companies and behind the scene we have our own analyses and metrics (we’ll be publishing these soon). But some aspects of the landscape are fully obvious – that is we are seeing a friendly environment for Quantum Start-ups for not only finding the talent, but also finding all important funds.

There are early signs that Quantum Computing doesn’t need to be at the level of millions of qubits to be useful. This is being explored by both existing companies for their internal use and Quantum start-ups who are angling to show the benefits of Quantum in a variety of sectors which appear promising. If incumbents businesses are risk averse then Quantum start-ups on the Algorithm and Tools side are stepping in to show the benefits of Quantum in areas such as finance and drug discovery and other optimization problems. Chicago Quantum is using D-wave’s Quantum Annealer to pick stocks. ProteinQure is exploring how Quantum can be used to develop pharmaceuticals.

Strangeworks is a Texas based Quantum start-up that has received $4m in funding aiming to make Quantum Computing accessible and easy to use. It’s founder is a serial entrepreneur who sees the potential of Quantum and is not strictly a Quantum scientist (or academic), but has shown aptitude in steering a company in the direction away from the often over complex visualizations and tooling environments and making these more user friendly. The CEO of Strangeworks, “Whurley”, as he likes to be known will provide the gateway services that enable more businesses to get interested and using Quantum technologies.

Corporate Quantum

Some of the world’s largest technology giants are exploring Quantum Computing. The likes of IBM, Microsoft, Google, Amazon, Intel and Honeywell are busy building qubits (hardware), tools and infrastructure. These businesses realize that the purported benefits of Quantum could totally disrupt their business. Imagine there is a smarter way to search documents, images, or perform machine learning tasks that outsmart classical techniques? If your business is computation – like Intel creating the actual hardware that manipulate the bits (the CPU’s the live inside our computers), it makes sense to be invested in Quantum Computing, because if the promise of Quantum holds true the entire business of selling CPU’s or processors could be at risk. Surprisingly Intel is the only processor manufacturer actually building and working on Qubit technology. Other chip makers so far have not entered the Quantum space. AMD and NVIDIA have no programmes that we were able to discern, in the Quantum space. That could leave these businesses exposed to disruptive technologies like Quantum and competitors that have invested in emerging technologies. Certainly there is a lot of hedging when it comes to Quantum. The skeptic might ask what use is this technology right now? For all of the headlines, the naysayer might say there is little tangible benefit. But that would be short-sighted. Bell labs gave us the solid state transistor from their research efforts. It is therefore possible that out of the research effort we see

Is Quantum Computing in a Bubble?

According to investopedia their definition of a bubble is:

A bubble is an economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. This fast inflation is followed by a quick decrease in value, or a contraction, that is sometimes referred to as a “crash” or a “bubble burst.” Investopedia

But determining whether we are in a Quantum bubble before a “bubble burst” is somewhat very difficult. Having lived through and worked through both the tech bubble of the late nineties and early 2000, I would say that we are nowhere near bubble territory for a few good reasons.

No dumb money.

There are relatively few institution or funds investing specifically in quantum technologies at the moment. There are the likes of Quantum Valley Investments created by the founder of the Blackberry mobile phone. There are also other VC funds such as Quantonation which is an Early Stage Venture Fund dedicated to Deep Physics startups. That said when looking at other Quantum players such as Xanadu they have received funding from the likes of Tim Draper and Silicon Valley Bank, fairly main stream VC firms. Currently even though funding into the Quantum space is undoubtedly increasing – we are not seeing massively wild inflows of money. We also posit that the majority of VC firms are not involved in Quantum deals nor Quantum ready or educated in the quantum field. We are a long way from the days of the dot com boom where money was thrown at ideas rather then businesses. All the invested companies that we cover and have researched have defensible products that are often very commercially focused or have emerged from academic settings offering an edge on existing technological approaches to building qubits, for example. We are certainly not at the stage of fluff, where peripheral businesses with no real benefit are created to suck up VC funding, which then go on to die. The late 90’s saw ideas that were funded such as WebVan which lost a fortune on free same-day shipping of anything (including items like a pack of chewing gum) – perhaps a business model ahead of it’s time. Pets.com was another that over spent on marketing, Another was boo.com, who had a product ahead of its time, rather like WebVan.

Not main stream…. quite yet

Still there is a quest for those Quantum killer applications. And there is hope it will come. Certainly Algorithms such as Shor’s offer great promise, but Quantum doesn’t mean that every classical algorithm can be sped up. What the cloud will do is expose potential Quantum workflows to a myriad of new minds and thinkers – who will take some of the foundational ideas and existing concepts and build on them. It’s akin to the same method at play when open source developers contribute to software and frameworks. Many projects are open source and not proprietary by their very nature encouraging development from a range of contributors. Frameworks such as Qiskit (supported by IBM) and a popular language for programming quantum Computers has (some might say) become the C or C++ of the Quantum world. Other entrants such as Microsoft support Q#, which along with its QDK make up a substantial portion of the Quantum Computing stack that most researchers and developers tend to use. Company acquisitions are more likely in the quantum space today then they were in the 90’s. Now we have the corporate giants interested Quantum with their own R&D programmes there is an acquisition target for the Quantum start-up. Go back to the early days of the web, and whilst there were companies buying tech companies, you could almost argue that tech as sector didn’t really exist. Revisit the 90’s and a lot of the focus was on IPO’s. Of course now there will be ready made homes for many of the current crop of Quantum start-ups to be acquired by larger technology players.

No Bubbles…just yet

Quantum computing and technologies could radically change many industries. We are still at the early stages of the Quantum Computing “gold rush”. For sure the pace of change will accelerate and continue to do so as more businesses realize that they must understand what Quantum might offer their business before their competitors do. There are plenty of free resources and learning materials that can help interested individuals, organizations and, well just about anyone who wants to understand better how Quantum Computing works on a fundamental level or how it can be applied to existing industries.