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Imagine a computer that’s so fast it can discover new drugs to fight cancer or Lou Gehrig’s Disease and bring them to market in a few years, instead of decades. And imagine stocks that can soar five-fold or 10-fold in just a few years, the way chipmakers like Nvidia $NVDA and Micron Technology $MU have done. Put those together, and you’ve got quantum computing, a decades-old science that may be on the cusp of an AI-like explosion.

That point was made clear last week, when the Commerce Dept. signed letters of intent to invest some $2 billion in nine U.S. firms with promising quantum computing technologies. The money, already part of Joe Biden’s CHIPS act, has been shaped by the Trump Administration into non-voting equity stakes, rather than loans or grants.

“Quantum computing has significant implications for national defense, advanced materials and biopharmaceutical discovery, financial modeling, and energy systems,” the department said in a press release, adding that “a strong domestic quantum ecosystem is essential for U.S. national security, technological resilience and long-term strategic leadership.”

The government investments follow a wave of private equity and stock market investment in quantum computing firms, and investments from larger firms, like $IBM, which will get $1 billion from the government and invest another $1 billion of its own in quantum computing.

So: What is quantum computing? Is it really the next big thing, and how do ordinary investors get in on the action?

Quantum computing isn’t just a bigger, faster computer, says Rebecca Krauthamer, the founder and CEO of quantum computing firm QuSecure. “That’s the biggest misconception about a quantum computer,” she said in an interview. Better to think of quantum computing as a method to discover the fastest and most optimal way to get through a maze. Instead of a single mouse trying every turn one after the other, imagine a family of mice, each trying every turn and sharing that information with each other instantaneously to find the shortest route. “You can hold all of these paths through the maze in your memory at once. Then, you’re cooking with quantum.”

The deep science of quantum computing is too complicated to explain here, but the keys to remember are that it is lightning fast, massively complex, and may just be getting close enough for real world applications. That’s where the business case comes in.

Quantum researchers and investors divide those applications into two major groups - offensive and defensive. Offensive is the really complex stuff, like finding new molecules to treat disease, or (less pleasurably) running massive facial recognition data systems that may even take a page from sci-fi writer Philip K. Dick’s Minority Report (remember the 2002 film version with Tom Cruise?) and predict criminal behavior. The defensive stuff may be even more important right now: Ensuring data security. Technologists fear that the first people to get their hands on advanced quantum computing will be able to crack the algorithms that encrypt everything from text messages and emails to bank transactions, medical records and possibly blockchain-encoded crypto currency. That’s why firms like Krauthamer’s are building next-gen security systems with quantum computing.

When will quantum computing take off?

Krauthamer says it may happen as early as 2029, when quantum computers become powerful enough to crack the algorithms that keep data safe. “No longer is the world saying, ‘ah, it’s a future problem’,” said Krauthamer. “All of a sudden, some of the smartest minds in the world are saying it’s coming now.’”

That’s why many tech and financial companies are moving to something called PQC, or post-quantum cryptography, an encryption system they hope can’t be outsmarted by quantum computers.

Noel Goddard, CEO of Brooklyn-based Qunnect, which is building the specialized networks and infrastructure that quantum computing will need to take off, says she’s probably two years away from her partners and clients being able to put quantum computers to work, and start building the software to run on them,

Not everyone agrees that “Q-Day,” as some industry people call it, is around the corner.

“You know, I’ve been pitched in my various roles that quantum computing is two years away for 15 years,” said Afsheen Afshar, founder, CEO and CIO of Pilot Wave Holdings, which buys and invests in firms that can benefit from AI and quantum computing, and who’s a former head of AI for PE fund Cerberus Capital Management. Now, he says, it may finally be getting closer. Current quantum computers can process just a few hundred or thousand qubits, the term used to measure quantum capacity. But Afshar says quantum computers need to be able to process millions, if not billions of qubits before they can tackle big problems like drug discovery. “So the famous expression goes, when there’s a gold rush, invest in the people making shovels, right?,” said Afshar. That means firms like GlobalFoundries $GFS, a New York-based chipmaker that has a promise of a $375-million investment from the government. Then there are the firms tackling technical challenges to quantum computing, whose chips heat up faster than even the Nvidia chips going into AI data centers. They can’t just be cooled with air conditioning, they need liquid nitrogen flowing across the surface of the chips to keep the complex calculations going.

How can investors grab a piece of the action?

Even as some of the firms that got CHIPS money last week saw their shares jump as much as 50%, it’s still early days in Quantum computing and therefore, in quantum investing, says Andrew Rocco, a tech analyst at Zacks Investment Research. He says established, listed companies are the best ones to invest in, including CHIPs recipients IBM and GlobalFoundries. “If you want a piece of potentially what quantum could bring, but also you don’t want to throw darts, I would say that IBM would be your best path,” Rocco said in an interview. He likes GlobalFoundries because they’re building the hardware that every quantum company will need, no matter whose technology wins. Then, he says there are “high octane, pure plays,” that also got CHIPs money last week, like D-Wave Quantum $QBTS, Rigetti Computing $RGTI, and Infleqtion $INFQ. Some Exchange Traded Funds offer investors access to a more diversified basket of quantum stocks, like the Defiance Quantum ETF $QTUM, the Wisdom Tree Quantum Computing Fund $WQTM.

“They have very, very little in revenue,” said Rocco, of the companies mentioned. “I would think of these as like early stage biotech,” he said, “if you’re looking for something that’s backed by fundamentals, these certainly aren’t just yet.” But he said, “the good news is now that they have this funding, you don’t have to worry about them going bankrupt. They have that government backstop in place to do research for the next few years. And the upside is asymmetric.”

With the right bet, any investor’s portfolio could take a quantum leap. #NotFinancialAdvice

—Peter S. Green

“They have very, very little in revenue,” said Rocco, of the companies mentioned. “I would think of these as like early stage biotech,” he said, “if you’re looking for something that’s backed by fundamentals, these certainly aren’t just yet.” But he said, “the good news is now that they have this funding, you don’t have to worry about them going bankrupt. They have that government backstop in place to do research for the next few years. And the upside is asymmetric.”

With the right bet, any investor’s portfolio could take a quantum leap. #NotFinancialAdvice

—Peter S. Green

Big Businesses mentioned this week

$NVDA ( ▲ 0.8% ) ,$MU ( ▼ 0.42% ) ,$GFS ( ▼ 0.59% ) ,$QBTS ( ▲ 7.46% ) ,$RGTI ( ▲ 9.63% ) ,$INFQ ( ▲ 14.94% ) ,$UMGP ( ▼ 1.99% ) ,$DIS ( ▼ 0.43% ) ,$SPOT ( ▲ 0.76% ) ,$BP ( ▼ 0.14% ) ,$CRH ( ▲ 0.48% ) ,$LULU ( ▲ 0.22% ) ,$NKE ( ▲ 3.02% ) ,$UBER ( ▲ 0.27% ) ,$DASH ( ▼ 0.56% ) ,$F ( ▲ 4.85% ) ,$TSLA ( ▲ 0.4% ) ,$JPM ( ▼ 0.85% ) ,$C ( ▼ 0.51% ) ,$ANTHROPIC ( 0.0% ) ,$INTU ( ▲ 1.71% ) ,$OPENAI ( 0.0% ) ,$GRPN ( ▼ 1.21% ) ,$SSNLF ( ▲ 116.8% ) ,$SBUX ( ▼ 1.31% ) ,$CMG ( ▼ 0.83% ) ,$SPXL ( ▲ 1.63% ) ,$DJIA ( ▲ 0.32% ) ,$NDX ( 0.0% ) ,$SCHW ( ▼ 0.3% ) ,$GOOGL ( ▲ 0.34% ) 

War Story

• Talks go on, oil goes down, missiles fly, oil goes up: With no sign of any strait talk on Hormuz, traders appear to be pricing in both declining economic activity and the eventual release of the 1,500 or so oil tankers bottled up in the Persian/Arabian Gulf. On Thursday, benchmark Brent crude was trading at about $96 a barrel and West Texas Intermediate at around $91, far below their wartime peaks of $126 and $119 each. Meanwhile, U.S. stocks marked their eighth consecutive week of gains. But getting all that oil out will not be easy. Before the war, about 130 ships passed through the Strait of Hormuz each day. First up is clearing the mines that Iran reportedly laid in the strait. Then there’s prioritizing which ships move first, and finally, there’s the messy business of keeping the ships moving through the 21-mile-wide strait without banging into each other, or running aground. Supertankers can take over a mile just to make a 90-degree turn. It’s why turning them is the basis of the world’s most boring management metaphor. Before that, stranded ships need to be resupplied, refueled and their massive engines restarted, meaning at least two months before all those ships start moving. None of that has helped U.S. consumers, as inflation hits three-year highs.

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The Usual Suspects

• The Lady ain’t no Tramp: Universal Music Group $UMGP, the long-time home of artists including Lady Gaga, Taylor Swift and The Beatles, likely won’t be sold to voluble Wall Street investor Bill Ackman and his Pershing Square Capital, after Universal’s French shareholder Bollore Group said Ackman’s $65 billion offer undervalued the world’s largest music company. “I don’t think it would be positive for the company and I encourage UMG management to reject that offer,” Bollore told shareholders at the company’s annual meeting on Wednesday. The Bollore family holds 40% of the voting rights (and about 18.5% of the shares) in UMG. Ackman needs a two-thirds vote to take control. Ackman has long pushed to get control of UMG and move its listing from Amsterdam to New York to “unlock value.” He also pledged to appoint former Disney $DIS president Michael Ovitz as chair. In May UMG said it would sell its 3.1% stake in Spotify $SPOT and use the cash to buy back its own shares. UMG shares are down 30% in the past year.
• BP’s corporate Turm-oil: Just because you’re the boss, doesn’t mean you can be bossy. London-based oil giant BP $BP (once also known as “British Petroleum” before a rebrand during the “renewable energy years” as “Beyond Petroleum” and now that we’re apparently over all that, simply, “BP,” once again…) ousted chairman Albert Manifold this week after whistleblowers complained that he was bullying underlings and news reports said he’d been trying to run the company, normally the job of its CEO, Meg O’Neill. Manifold, who previously ran one of the world’s largest building supply companies, Dublin-based CRH $CRH, had no oil-and-gas experience. He’s the third chairman to depart in the past three years, and O’Neill is the company’s third CEO in the same period. BP has been trying to reverse plans to be a clean energy company, and re-embrace its fossil-fuel-burning roots. Its share price rose more than 20% under Manifold’s tenure, but has fallen 9% in the last 5 days. Manifold has denied the allegations. “I dispute entirely the characterization of my conduct, and I will not allow a false narrative to go unchallenged,” he said in a Bloomberg interview. BP, meanwhile, stands by the claims and quickly scrubbed all mention of him from its website.
• Lululemon founder takes a deep breath: Yogawear pioneer Lululemon $LULU has reached a state of inner peace, at last, with founder Chip Wilson, who’s been haranguing the company for years, saying it’s lost its yoga mojo, and even launching a proxy fight to change the firm’s board. Under the new peace deal, Wilson (who owns 8.7% of the company’s stock) will shut up about the company for 18 months. In exchange, he can name two directors, and the two sides will agree on a third director with marketing chops. Former top Nike $NKE exec Heidi O’Neill becomes CEO this fall, as Lululemon’s U.S. sales are faltering and the company’s share price has gone downward, dog, by 60% in the past year.
• Mars, Schmars. We’re going to the Moon, baby! Forget about building a manned space station on mars, NASA’s just awarded a bunch of contracts to build a $20 billion Moon base, and the first of those are going to Jeff Bezos’ Blue Origin, which gets $468 million for two un-crewed landers. Astrolab and Lunar Outpost will each get $220 million to build unmanned lunar rovers. SpaceX did not receive any contracts in this round.
• Uber Essen: What could be wurst? San Francisco-based Uber $UBER has boosted its stake in German food delivery app Delivery Hero to nearly 37% with the purchase of a 14.6% stake held by Hong Kong investment manager Aspex Management. The move sets up a potential takeover move by Uber that would value the German company at about €12 billion. Delivery hero’s Middle East operation, Talabat (which means “orders”), has been eyed by DoorDash $DASH. Delivery Hero’s shares are up nearly 150% since mid April on takeover rumors. Uber is down 20% in the past year, and DoorDash is down 23% in the past year. In Massachusetts, drivers for Uber $UBER and Lyft $LYFT have unionized and will be represented by the App Drivers Union, following a 2024 ballot initiative. Ride-share drivers in California and Illinois hope to unionize soon.
• There’s a Ford Battery in Your Future: Ford $F stock is up by a third in the past two weeks, reaching heights it last saw four years ago, when shares broke $16. And it’s not because of newly relaxed energy efficiency rules or a sudden thirst by suburban dads for oversized pickup trucks. Nope, after canceling ambitious EV plans, Ford cleverly spun out its EV group into an energy storage unit called “Ford Energy.” Making those batteries available for AI data centers, utilities and industrial customers now has Ford competing with Tesla $TSLA.
• Star Wars 12: The Return of the Merchandising. Disney’s $DIS Star Wars series is back with its unnervingly cute and totally merchandisable 14-inch-high Baby Yoda character, Grogu. The big-eared, gibberish-speaking creature led the film to a $145 million box office debut last weekend, triple its nearest competitor. But the real good news was a ComScore exit poll showing kids loved the movie, even as critics panned it, meaning there are gonna be a lot of Grogus filling Christmas stockings come December. Disney shares are up nearly 13% since a late March low, but still down nearly 8% in the past year. Investors in the stock over the last 20 years, in fact, have been on a rollercoaster as exciting as any of those available at its theme parks.
• WWJB: What Will Jamie Buy? JPMorgan Chase $JPM CEO Jamie Dimon says he’s prepared to spend $20 billion buying something. But what? “There might be, in the next couple years, a chance to put $10 or $20 billion to work buying something,” Dimon said at a conference this week. But anything he buys would have to fit into JPMorgan’s existing network, he said, before slamming his competitors for trying to merge their way out of poor performance, saying M&A is not a growth strategy. Then he poured cold water on his own idea. “The first thing they do when they’re not doing well in organic growth is they start to bulls--t about [M&A],” Dimon said of other corporate execs. “I don’t want to hear about M&A ... What are you doing to grow your business — sales, branches, tech, profits, products, services?” Meanwhile JPM has mainly (checks notes) bought distressed banks to grow, including Bear Stearns after the 2008 crisis and First Republic after it over-leveraged to Silicon Valley in 2023. Dimon got burned paying $175 million for college aid startup Frank in 2021, which turned out to be a fraud. The cash has been freed up as reserve requirements have been eased under the Trump Administration. JPM is outperforming the stock market over the last five years but it’s being caught up by rival Citigroup. $C

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Tech time

• Div-AI-ne Intervention? Pope Leo will not abide by the things that are going on with AI. In a 42,000-word letter, the Chicago-born head of the Catholic Church warned that new rules and regulation are needed to cope with what he called “the distorting effects of technological power,” to ensure that AI benefits people, not the “transnational companies” that put profit ahead of humanity, and may put most of humanity out of work. The Pope presented his letter alongside Anthropic $ANTHROPIC co-founder Christopher Olah, who’s not a Catholic, but said the AI community needs the pope’s moral guidance. That’s not how the rest of Silicon Valley responded, though. The New York Times collected the musings of some senior AI people in the Bay Area who see the Pope as an interloper: “People are matter-of-factly saying that they are looking to build a machine God,” said Rayan Krishnan, CEO of a firm that tracks AI tools. “They are not saying that ironically or in jest. They are saying it as a matter of fact.” Jeremy Nixon, CEO of the Infinity AI Institute, took a page from (Catholic) Vice President JD Vance’s book and said the Pope simply doesn’t understand AI. “Practically speaking, it will achieve the outcomes that many religions claim their deities would be able to achieve,” he said.
• Still, AI continues its relentless march: A Paris-based nuclear power developer called Newcleo says it plans to go public in the U.S., betting that its plans for lead-cooled reactors (they are supposedly less accident prone than the pressurized water reactors at Fukushima…let’s hope so…) will be in demand to power the AI boom. Turbo layoffs are coming as Intuit $INTU announced it will fire about 3,100 people, 17% of its workforce, and shift to AI to manage projects. The news comes as OpenAI $OPENAI says it’s adding personal finance options to ChatGPT, with support from Intuit, which owns TurboTax and Credit Karma. Groupon $GRPN also said it’s cutting 400 workers, about 25% of its workforce, to rebuild as an “AI-first” company. Over in South Korea, Samsung $SSNLF employees used their strong unions to wrangle a very lucrative concession from management: 78,000 workers in the company’s chip business will share 10.5% of Samsung’s operating profits, giving them an average bonus of about $400,000 each. Shares in Samsung rose 7% on the news. They’re up 427% in the last year.
• Suddenly you’re talking real numbers: Big tech companies are finding that their quest to use agentic AI is eating up so many tokens that it may simply be cheaper to hire humans. “For my team, the cost of compute is far beyond the costs of the employees,” Bryan Catanzaro, vice president of applied deep learning at Nvidia $NVDA, told Axios. Add to that employees using AI tokens simply to show they are doing something with all that free time Claude has given them since it’s taken over their daily work, and maybe humans will triumph, after all? Claw creator Peter Steinberger said he spent $1.3 million in a month on OpenAI tokens.

Trumplandia

• Interest rates ain’t going down any time soon. That’s the consensus view in the world of economists and bond traders. As Moody’s Analytics chief economist Mark Zandi said in a post this week, yields on T-bills keep climbing. “Treasury yields have jumped in big part due to the Iran War and the resulting increase in inflation expectations, but also to the ballooning federal budget deficit and surge in Treasury securities issuance necessary to finance it,” Zandi wrote. The Treasury issued a record $3 trillion in debt in March, and that’s growing by a record 10% a year, or 10% of GDP a month. This year, for the first time, the federal debt exceeded the country’s annual economic activity (aka GDP). The problem, as Zandi notes, is who’s gonna buy all those bonds, unless the Treasury offers even higher interest rates. New Fed chair Kevin Warsh says he doesn’t want to buy more Treasury debt, and neither do traditional purchasers like China and Japan. “That leaves highly leveraged, capricious hedge funds as the dominant new buyers,” said Zandi. And that means rates are likely to move up even further.