IBM could be a big winner as quantum computing moves out of the science-fiction realm

By Hannah Pedone

The new era of quantum computing will happen, IBM says, as it sees nothing fundamentally to stop it

IBM is set to receive $1 billion in funding from the U.S. government to build a quantum foundry.

IBM's goal is to build a fault-tolerant quantum computer by the end of the decade. And the Trump administration now has skin in the game.

On Thursday, IBM (IBM) revealed in a press release that the Department of Commerce will support the company with a $1 billion award, which will go toward a new IBM company, Anderon, a pure-play quantum foundry. IBM will contribute $1 billion in cash to Anderon.

"It's like we're in a race, and this technology will happen. I don't see anything that will fundamentally stop it," Jay Gambetta, director of IBM Research, told MarketWatch in an interview.

In the first phase, IBM was building systems.

"What has changed is we're in this new point in time where we know what we've got to do," Gambetta said. "It's become more engineering, and we want to speed that up."

In the engineering phase, he said, wafers need to be reliable and have throughput, or be producible at high volumes. The next step to do that, Gambetta said, is creating a "dedicated quantum foundry for quantum computers."

Anderon will be an IBM subsidiary, focused on delivering technology to a number of different quantum-computer builders, including IBM itself.

"We are now taking the foundry part of what we had been incubating and creating that as a resource" for the U.S. government, he said.

The U.S. government deal with IBM was part of $2 billion in Commerce Department grants to nine quantum-computing companies announced Thursday. The Trump administration is taking minority stakes in each of the companies, though details about the scale of the investments were not announced.

Gambetta said the federal investment represents a "statement of maturity" for the industry. "This means quantum has now got to the point that, for it to have the reliability for it to scale, we need to create a third-party foundry," he said.

Physicist Brian Leeds DeMarco, director of the Illinois Quantum Information Science and Technology Center at the University of Illinois Urbana-Champaign, told MarketWatch that "[q]uantum technologies, especially quantum computing, have the promise to transform our economy, society, and national security."

He said that the Commerce Department's investment marks a "bold step" to secure "U.S. supremacy and competitiveness through developing at-scale fabrication and device capabilities."

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Bernstein analyst Mark Newman told MarketWatch that the deal with IBM is a "proof point" that "quantum advantage" is getting "closer and closer," as is commercial adoption.

The term quantum advantage refers to quantum's doing something "cheaper, faster, or more accurately" than classical computers, by Gambetta's definition.

Quantum has the potential to move the needle on research in national security, chemistry, biochemistry, pharmaceuticals and finance - areas, Newman explained, where outcomes can be "infinitely complex."

That's a game changer, Newman said, because traditional computing is not very good at achieving solutions in those areas that require lots and lots of computing power to be thrown at them.

Quantum computing, by contrast, "just in its nature of being able to have infinite outcomes at each bit, can look at lots and lots of different outcomes at the same time," Newman said.

IBM's plan is to get quantum computers in the hands of as many students, university researchers, national labs and other enterprises as possible.

Yet how lucrative quantum will be for IBM remains unknown. Morningstar analyst Luke Yang told MarketWatch that he's reluctant to say when the venture will impact IBM's financial performance. "We don't think IBM will see material revenue from quantum before the 2030s, when the company can come up with large-scale fault-tolerant quantum systems," Yang said.

IBM's latest quarterly filing shows no revenue from its quantum business.

Investors don't seem to care. IBM's stock has run up 16.1% this week, as of afternoon trading on Friday, which put it on pace for its best week in 24 years.

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-Hannah Pedone

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