Quantum Computing's Steps to Commercialization & What Sets IONQ Apart

Nicole Pedolides (0:00)

Welcome back to The Watchlist. We're live on the floor of the New York Stock Exchange, and glad you're with us. I'm Nicole Pedolides. Let's discuss the future of quantum computing. Joining me right now, Cory Johnson, Chief Market Strategist, Epistrophe Capital Research. I'm so glad you are with us. So let's talk about where we are in quantum computing, the momentum, the upside potential for this group of names, and we'll get into some of the specific names too. Within your notes, I saw a lot of specifics as well that I'd like to get to, but what's the big picture?

Cory Johnson (0:32)

Look, the hope here is that someday quantum computing can be, I don't know what AI is today. Among Silicon Valley people, the joke is that quantum computing has been five years away for 30 years, and that may still be the case. Now, the public markets don't reflect that. We have this very peculiar situation with quantum where it is unique among, I think, technologies right now, where investors are out way ahead of where the market is. There's a lot of criticism about the companies that are about to do IPOs, OpenAI, Anthropic. We saw this with SpaceX. We see this with companies in other areas in technology, where the IPOs seem to happen so much later in the development of a company. We used to see companies go public with $500 million valuations. We used to see them go public after a D round. Now, we see an EFG round. We see companies like SpaceX that are private for 20 years. And the late rounds of venture do the things that the public issuance used to do, which is to provide liquidity for some investors or from some employees and so on. That is not the case with Quantum. And maybe you heard you were talking about AST a minute ago in space as well. Where we see the public market investors are the ones taking a risk for an industry that doesn't really exist yet.

And I've got friends in Quantum.

I'm bullish for, I'm hopeful for their success. But this is an industry that just isn't there yet right now. We really are looking at science experiments that have yet to see a great commercial business.

Nicole Pedolides (2:05)

What's interesting too is you said we're just not there yet. And there was a time that people really started to get nervous about what Quantum may be able to do. You remember Jensen Wong talked about it. We talked about concerns about Bitcoin and how quickly what Quantum can do to unravel your accounts and things like that. I'm happy to bring into our conversation here as well. Brendan Cavanaugh, Chief Strategy Officer, Defiance ETFs. I'm glad you're with us because we did read in Barron's that Quantum computing is having a moment. And in fact, what you need to know about the hottest sector after AI, is it the hottest sector after AI? You noted that you're bullish and I'm curious about your thoughts now and whether or not you think it really can have some good momentum going forward. Brendan?

Brendan Cavanaugh (2:49)

Yeah, I mean, we're definitely bullish on it.

Like I said, it's an area where DeFi spends a lot of time. And while you're not seeing a ton of, or you may not see a ton of commercialization right now, we have seen basically Quantum computing moving from kind of that science fair or lab approach to some sort of commercialization. So we see these baby steps are having a new generation and these baby steps of progress as something that keeps us in line and keeps us really bullish on what Quantum computing could do for a ton of different sectors and a ton of different industries going forward.

Nicole Pedolides (3:29)

Yeah. And you also mentioned the government involvement. That's just a quick thought on that Brendan. Why is that important?

Brendan Cavanaugh (3:36)

Look, it's pretty hard to get government money and any sort of public funding, but it's definitely something that's hard to lose once you have it, right? It's very sticky once the government has decided to put money behind something. And so, quantum computing has been a huge priority, not just for the US government, but for obviously countries like China, the EU, Japan, India, Korea.

You're seeing them commit a ton of public funds, not just as they look at things like quantum encryption as a matter of national security, but it's also a matter of national pride in terms of which country is going to emerge first as a leader in the space. So you're seeing direct investment from the US government, for example, in a couple of different quantum companies. And like I said, it's hard to lose that money once you have it. And so you expect now that there's hundreds of millions of dollars in grants going to these companies for the government to take equity stakes, you'd expect that to be a continued priority and expect that to keep happening for years to come.