What Nvidia's CEO Got Wrong About Quantum Computing… |
Money & Markets Daily,
Arthur C. Clarke once famously said: “Any sufficiently advanced technology is indistinguishable from magic.”
It’s a great quote … one that captures the wonder of technological creation … the awe a child feels staring up at a movie screen … or the frustration you might have felt the first time you logged onto a new computer.
But nowhere is this quote more relevant today than in the world of quantum computing.
Because for the vast majority of us, quantum computing may as well be magic. Utilizing concepts like superposition and quantum entanglement, these new quantum systems will be lightyears ahead of modern computers — redefining everything from research to cryptography.
That is, at least in theory.
Because quantum computing is still (largely) in its conceptual phase … a fact that Nvidia CEO Jensen Huang seemed eager to point out last week when he told the press it would be another 15 to 30 years before we saw “very useful quantum computers.”
Of course, the quantum computing sector didn’t exactly agree.
D-Wave Quantum (NYSE: QBTS) CEO Alan Baratz said Huang was “dead wrong” about the commercial viability of quantum computing.
So who’s got it right?
Well, the reality of quantum computing (at least as it pertains to investors like us) is somewhere in between…
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First, the “Elephant” (or the $9,000 Lizard Jacket) in the Room
First and foremost, we always take CEO insights with a grain of salt.
Because, at the end of the day, CEOs are salesmen. It’s their job to sell a vision of a company to its employees, investors, board members and the press.
A good CEO is always going to be one of the company’s loudest cheerleaders.
It’s pretty obvious that the CEO of a quantum computing company like D-Wave is going to be very bullish on the future of his industry. This is especially true after Huang’s offhand comments sent D-Wave’s shares plummeting by 36%.
On the flip side, consider Huang’s position right now…
Over the last few years, Nvidia has rocketed from relative obscurity to the top of the S&P 500 index.
The company Huang founded with a few close friends more than 30 years ago in a Denny's is suddenly worth $3.34 trillion.
And he’s adapted remarkably well to his new role as a leading tech visionary and mega-CEO.
Gone is the old black leather motorcycle jacket Huang used to wear during presentations, replaced last year by a $9,000 lizard skin jacket from Tom Ford — a far more fitting choice for a technological master of the universe.
But Huang is also acutely aware that this latest (and greatest) success stems from the fact that Nvidia’s chips are the best in the world for cutting-edge AI research.
He’s also aware that Nvidia’s shares are effectively “priced for perfect future performance” at a P/E ratio of 53.
If quantum computing were to start gaining steam and investment, it could pose a serious threat to NVDA’s future business (and valuation).
So it’s entirely possible that he’s trying to control the narrative and “talking his book” on quantum computing. If he can convince investors that the new field isn’t worthwhile, they may be less likely to stray from NVDA.
What’s the REAL Story with Quantum Computing?
Quantum computing is certainly a mega trend at this point.
And by definition, mega trends tend to play out over the course of years — if not decades.
So on some level, Huang’s prediction might not be far off. It might take a few more decades before quantum computing becomes a meaningful part of our day-to-day lives.
But for me, as an investor, that kind of prediction is less of a warning sign and more of a ringing dinner bell…
For example, let’s say Huang’s right. 15 years?
Well, if I bought shares of NVDA 15 years ago, I’d be up 31,263%. Enough to turn $10,000 into $3.1 million and retire in Aruba. There’s also Palantir Technologies (Nasdaq: PLTR), initially founded in 2004, which has now become a $157 billion company and the S&P 500’s best-performing stock for 2024.
When it comes to cutting-edge technology, it’s most often the sharp early investors who come away with the biggest gains. It’s not uncommon for fortunes to be made years before a technology hits the market.
We also might not be as early as Huang thinks.
You may recall that in early December, Google’s experimental quantum computer, Willow, cracked a major encryption challenge that had been unbroken for 30 years.
Google CEO Sundar Pichai claimed the challenge would’ve taken a standard supercomputer “over 10^25 years, far beyond the age of the universe” to solve. Willow cracked the code in less than five minutes.
Much like the viral success of ChatGPT surprised the world and fired off an AI revolution back at the end of 2022, we could soon see a similar “killer app” spark a mad dash toward quantum stocks.
And we’ll be ready for it.
To good profits,
Adam O'Dell
Editor, Money & Markets Daily
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