TLDR: For those with lower attention spans, here is a rocket: 🚀. There are very few "quantum" pennies. However, one in particular: QUBT is a promising middleware company that provides optimization based software solutions and is one of the very few companies that can write software for quantum systems. They launched their first product on April 23rd, on June 2nd it was rated as best in class and they also issued 12,991,384 additional shares (they currently have 8,084,917 outstanding).
Quantum Computing Inc, ticker symbol $QUBT, trading for ~$2.65.
Quantum computing is the next technological holy grail, and is predicted to be a trillion dollar industry virtually the day after someone finally makes a useful machine. For those unfamiliar with quantum computing, its a way of storing and processing data using the unique properties of quantum mechanics. The classic example is Schrodinger's cat, which is both living and dead at the same time. Quantum particles can achieve a state called superposition, which allows them be two things at once. That means a quantum byte of information, known as a qubit, can be both a 0 and 1 simultaneously, whereas a boring classical computing byte can be only a 0 or a 1. Therefor, if you wanted to store information in a classical system, for every piece of information you want to store you need one byte. Qubits on the other hand, because they can occupy two states at once, can store/process data exponentially. Lets say your RAM, which is around 8gb for most laptop users, or 8 billion bytes, was actually made of qubits. That would mean instead of being able to store 8 billion pieces of information you could now store 2^8000000000 pieces of information – or millions more orders of magnitude more pieces of information than atoms in the universe (there are around 10^82 atoms in the universe). Activate skynet.
While all the above numbers are truly amazing, none of this is achievable yet. Decoherence is a massive problem, qubit stability can only be achieved for a few 100 nanoseconds, most systems require near 0 kelvin (or -273F degrees, aka absolute zero) temperatures to achieve superposition, and even then once you try to determine the state of the qubit it is no longer in superposition and thus researchers are trying to leverage quantum entanglement to get around this problem. Scott Aaronson is probably the world's foremost leading expert on this topic, look up his work if you want to learn more. He did a great podcast with Lex Fridman that you might find interesting: https://www.youtube.com/watch?v=uX5t8EivCaM
In spite of these limitations, quantum computing is here to stay. In October of 2019, Google published a paper on their achievement of quantum supremacy, which is a fancy way to say they demonstrated an instance in which a quantum computer outperformed the world's most advanced super computer. You can read the article here, free of charge: https://www.nature.com/articles/s41586-019-1666-5 . IBM took issue with this publication because while google did technically succeed, they cherry picked a task that only a shitty quantum computer with no logic qubits or decoherence could perform – which is simply generating a random sample. If the qubits are constantly interacting with their environment at random (which is the current state of quantum computing), then all google had to do was measure the randomness to generate a random sample. As you might be thinking, and IBM would agree with you, how does this demonstrate computing at all? This same task is surprisingly taxing on a normal computer, so while utterly useless to most and, questionable at best, it does technically achieve quantum supremacy. Because of this accomplishment, quantum computers have a proven use, and are here to stay.
Not only has humanity reached the great accomplishment of making a truly fast randomness machine (a little satire for you), rallying the academic communities, but governments around the world have gotten on the band wagon as well. US House of Representatives passed the National Quantum Initiative Act recently, which provides over a billion dollars in funding for quantum computing programs. Now that the gov is on board, this is definitely here to stay.
Take a moment to think about what happened after the first computers were invented – people suddenly needed monitors, keyboards, a mouse, a desk, a chair, internet service, and thousands of dollars of software – all adding up to $$$$$$$$$$. While the catalysts of quantum computing its self is likely still far away, the secondary markets for all the junk people will need is well underway. The first need is the ability to use the computer, which requires software – aka middleware.
Enter QUBT. This software company took over a beverage company back in 2018, did a reverse stock split, and has been hard at work since. Their goal is to create middleware that maximizes the efficiency of solving very difficult problems, often referred to as NP problems (known lovingly as nondeterministic polynomial time, which just means you can't solve it unless you try every answer and check… unless you can solve the infamous P=NP problem – you get a million dollars for showing your work too). NP problems are often logistical in nature from a government and business stand point. The questions usually revolve around concepts like "how to best use 1,000,000 employees" etc etc. The kinds of questions if answered correctly could boost productively and cut overhead. However, due to their nature, these problems contain hundreds of thousands of variables that all need to be modeled temporally and spatially and it quickly becomes impossible to compute. QUBT, however specializes in writing software that can do this. What is interesting about QUBT is they have written software to address NP problems using CPUs, GPUs, and early quantum systems as well. So, whatever a company's resources are, QUBT can help them make the best use of them.
It is important to note that giants like Amazon, Microsoft, and IBM provide similar services, and many would say are untouchable because of they also provide these services through their cloud platforms, and wrap these services into larger service plans, thus offering a complete package. Turns out, QUBT not only offers their middleware through a cloud platform as well, but they also do it better: https://ir.quantumcomputinginc.com/article/?article_id=2042235. QUBT sent their software to a physics lab at Cornell, which did a full assessment and determined it was a superior platform.
QUBT's biggest advantage in the future is providing the middleware necessary for people to switch from solving really hard problems on classical computing hardware to solving these same problems on quantum machines (whenever they get here). With the internet revolution profoundly burned into minds of Boomers and GenXers who were in work force in the 90s, you can bet these people who now make up the senior leadership of every major corporation and government in the world, have no intention of being burned again. The changes are happening now.
QUBT estimates they will do 100 million in business in the next year, so thats good. However, they still need capital to get off the ground and did this last week:
"The Company is filing the Registration Statement in connection with the offering from time to time, pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended, by Oasis Capital, LLC (“Oasis”) of up to 12,991,384 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), consisting of (i) 12,820,513 shares of the Company’s common stock issuable to Oasis pursuant to the terms of an Equity Purchase Agreement (the “Financing Agreement Shares”); and (ii) 170,871 shares of Common Stock previously issued to Oasis (the “Previously Issued Shares”)."
Considering they have 8 million shares outstanding, the addition of another 13 million is quite significant. However, QUBT hit a high of $4.80 the day after this was filled, and has since fallen to $2.65 as of Friday. Proportionally speaking, if we believe QUBT should dilute relative to the new shares, then this has more to fall. However, considering they were in the middle of a hefty pump, the current share price could represent the bottom.
They are getting some traction on google trends too.
My assessment is one of caution when deciding what to do with QUBT. My biggest concern is its likely a matter of time before one of the big companies one-ups them and takes whatever market share they gain over the next few months or year (or buys them out which could be good). However, considering their narrative, and the irrational exuberance that can follow when people make posts like this on twitter:
I don't see why this wouldn't become a meme stock in the near future. Just like you don't fight the FED, I have learned to not fight the narrative. Regardless, I am a bit scared of the timing on this one considering quantum computers have yet to make it out of the lab. However, their NP optimizing platform that can run on GPUs and CPUs seems to negate this by providing the potential to profit in the short term. This is a company that has a cool product, in a saturated market filled with absolutely monster competition, and has yet to be profitable… probability suggests their future may remain dark (although, I'm sure their NP crushing software already knows this answer).
In full disclosure, I actually wanted to write a full quantum computing investing piece, but QUBT is the only penny in this space that is worth talking about. Most of the excitement in terms of addressing the issues I outlined in my background information is coming from bigger players that own significant stakes in private start-ups and university labs that are doing all the heavy lifting. D-wave, Google, IBM, and Intel are the players to watch closely. There is an ETF called QUTM, but their holdings are garbage. Its basically a bunch of semiconductor companies that have quantum on their page somewhere and have yet to make any progress in the space. The big players and their private investments are the ones filling all the patents and making progress.
I do want to do a formal risk assessment section. So in honor of u/Cicero1982, here it goes:
The major risk factors with QUBT is there lack of capital, and need to acquire capital in order to appropriately market and sell their new software. Considering their last offering was on the 2nd, another offering may not happen for some time. Overall the company has never turned a profit (as indicated above, they haven't had a product until April), and their total debt is $29 million. A lot of the risk associated with this company is speculating on what they will need to do with their stock to get the capital they need to move forward. I do anticipate a sizeable amount of dilution if they aren't willing to be bought out. To date, I have not seen any buyout rumors, so I expect dilution. Finally, their most recent offering netted them enough funding to last a year, but considering their expenses moving forward are going to include more than just supporting a small team of software engineers, I imagine these new funds will not last more than a couple months.
I am hoping to hear other's thoughts on this investment. Please share your criticisms and critiques, and any information I missed.