Quantum computing is rapidly becoming a promising opportunity within the artificial intelligence (AI) market. Recently, small-cap stocks like Rigetti Computing, D-Wave Quantum, and IonQ have gained prominence in the AI sector. These companies assert they are making significant advancements in the emerging field of quantum computing.
Investors have shown increasing interest in these stocks, anticipating breakthroughs in AI. However, many companies operating in quantum computing remain in developmental phases, generating minimal revenue while incurring substantial cash expenditures.
Investing in quantum computing is not necessarily unwise, but investors are advised to consider the broader picture and evaluate which established leaders in the AI industry might also contribute to developments in quantum computing. Nvidia is viewed as one such company poised to dominate the quantum computing sector, and its stock currently appears reasonably valued.
Nvidia is a central player in the AI movement. Over the past two years, its influence has been highlighted by its advanced graphics processing units (GPUs), which run algorithms and computations at high speeds. Many AI applications depend heavily on Nvidia’s GPU chips. Additionally, Nvidia offers a robust software platform, initially named Compute Unified Device Architecture (CUDA), which complements its hardware and supports AI progress.
Nvidia is capitalizing on the synergy between its GPUs and CUDA software by applying this combination to the quantum computing arena. Despite limited discussion of Nvidia in the context of quantum computing, this sector offers a valuable opportunity for the company.
In a recent address, Nvidia’s CEO, Jensen Huang, indicated that commercial quantum computing applications might not be available for another 20 years. While this prediction might pose challenges for companies like Rigetti, D-Wave, or IonQ, it is seen as advantageous for Nvidia. The company is extending its CUDA platform into quantum computing with a new architecture called CUDA-Q, designed for supercomputing and quantum mechanics.
Although the applications for quantum computing are currently limited, CUDA-Q is expected to play a crucial role in Nvidia’s potential growth in the coming years. The company is likely to replicate its strategy of integrating end-to-end infrastructure for customers as it expands its quantum computing operations.
Currently, Nvidia’s stock is experiencing volatility. Over the past month, its shares have decreased by as much as 15%, affecting its market value significantly. This decline is attributed to competition from a Chinese AI platform, DeepSeek, which allegedly uses Nvidia’s older GPU architectures. However, recent reports suggest DeepSeek employed more sophisticated technologies than initially reported, and prominent companies like Microsoft, Amazon, Alphabet, and Meta Platforms continue to heavily invest in AI infrastructure, indicating continued collaboration with Nvidia.
Despite the fluctuating stock prices, Nvidia’s valuation remains reasonable, with a forward price-to-earnings (P/E) multiple of 31 and a price-to-free-cash-flow (P/FCF) ratio of 61. Given these valuations and the high demand for AI infrastructure, Nvidia’s stock remains a favored choice on Wall Street, with an expected price increase of at least 23% from current levels.
While the immediate future suggests further growth for Nvidia stock, the long-term potential lies in the eventual mainstream adoption of quantum computing. Analysts have not yet heavily factored the prospects of quantum computing into their evaluations, keeping Nvidia’s consensus price target robust despite concerns over DeepSeek.
Nvidia is seen as a strong investment option currently, with the potential for CUDA-Q to establish itself as a significant business segment driven by developments in quantum computing.
Several notable figures, including Randi Zuckerberg, John Mackey, and Suzanne Frey, are associated with The Motley Fool, which has holdings in major tech companies including Nvidia.
