Is Quantum Computing in a Bubble, or Building Something That Lasts?

[Faded Ross]

With funding rounds in the hundreds of millions landing almost weekly, it is natural to ask whether quantum computing is heading for a bubble. Just this month, Oratomic raised $475 million only three months after a $300 million round, and Universal Quantum landed the largest Series A for a UK quantum computing company. On the same day, Gartner predicted that more than half of quantum computing startups will shut down by 2030. Those two stories can sound contradictory. I think they fit together into a more hopeful picture than the word bubble suggests

It is worth being clear about what a bubble is. In the classic sense, prices rise far above any reasonable estimate of value, driven by excitement rather than fundamentals, and then collapse. The dot com boom of the late 1990s is the obvious comparison. Huge amounts of money went into internet companies, many of which had no realistic path to profit, and most of them failed. Yet the internet itself did not fail at all. The fibre, data centres and skills built during the boom became the foundation for everything that followed

Quantum computing has some bubble like features. Valuations have climbed quickly, and some companies have raised money at prices that assume enormous future success. Oratomic's CEO even admitted to the Wall Street Journal that nobody knows what the business models will be yet. There are an estimated 200 to 300 quantum computing startups, and Gartner expects many of them to struggle for revenue. Not every company will get to the finish line, and some investors will lose money

But there are also important differences from a classic bubble. Much of the funding comes from governments with long term strategic goals rather than short term returns. DARPA, the US Department of Energy, the UK's national quantum programme, Germany, Japan and the European Union are all investing for the long haul. Real revenue exists too. Gartner forecasts worldwide quantum computing revenue of around $870 million this year, rising to $1.1 billion in 2027, mostly from governments, research labs and banks

The science is also delivering steady, measurable progress. Error correction below threshold, logical qubits, faster interconnects and better benchmarks have all arrived in the past few years. Independent groups like Jülich are testing machines from different vendors side by side. That is very different from a bubble built on hype alone. The question is not whether quantum computing works, but how long it takes to become commercially useful

A shake out, where weaker companies close or merge, is normal in any young industry. Cars, aircraft, computers and the internet all went through it. In the early twentieth century there were hundreds of car makers in the United States, and only a handful survived. That did not mean cars were a bubble. It meant the market was sorting out which approaches and which teams could deliver. I expect quantum to follow a similar path, with acquisitions as common as outright failures

There is plenty to be positive about in what this period is building. Universities are training thousands of quantum engineers and scientists. Supply chains for cryogenics, lasers, control electronics and specialised chips are maturing. Companies like IBM are setting up shared foundries, such as its new Anderon subsidiary, so that smaller firms do not need to build their own fabs. Even if some startups fail, those skills and tools will remain. That is exactly what happened with the internet's infrastructure

There are some sensible warning signs to watch. Companies that promise near term commercial advantage without clear evidence deserve scepticism. So do valuations that jump several times over in a few months with no new technical milestones. Investors and journalists should ask for independent benchmarks and published results. The healthiest companies are the ones that are open about their limitations and clear about their timelines

My overall view is that quantum computing is in a period of heavy, partly speculative investment, but not an empty bubble. Some valuations will look too high in hindsight, and some firms will disappear. But the underlying technology is real, government commitment is strong and the long term prize, in chemistry, materials, security and science, is enormous. If there is a correction, I expect it to be a healthy reset rather than the end of the story

The timeline mismatch is at the heart of the tension. Venture capital funds usually expect returns within about ten years, while useful fault tolerant quantum computers may still be five to ten years away. That gap means some investors will run out of patience before the technology matures. Government money, corporate research budgets and patient long term investors help to bridge it. Companies that build steady revenue from sensing, software, services or research systems along the way are much better placed to survive

Quantum sensing and networking are good examples of nearer term value. Quantum sensors for navigation, medical imaging and geological surveys are already being tested and sold. Quantum key distribution networks are running in cities around the world. These markets are smaller than the dream of a universal quantum computer, but they are real and growing. They also keep teams employed and skills sharp while the bigger machines are built

What do you think? Is quantum computing in a bubble, or a normal early stage boom? Which kinds of companies do you think are most likely to come through a shake out? And what signs would convince you that the hype has gone too far?

Too many quantum startups, too little money to keep them alivewww.theregister.com