NGS Super secular trends: quantum computing

Each year, our Investments team sets the strategic asset allocation for our portfolio. As part of this exercise, we produce an in-depth research piece on upcoming “secular trends”.

What are secular trends and why do they matter?

Secular trends are evolving trends in the market that take place over a longer time horizon, rather than being seasonal or cyclical. It’s important for us to understand secular trends when we’re reviewing and setting our long-term strategic asset allocation, as they help us identify investment opportunities and risks.

Key trends ahead

Our secular trend analysis this year looked at:

1. carbon neutrality
2. electronic and autonomous vehicles
3. 3D printing
4. the metaverse
5. demographic changes
6. quantum computing
7. geopolitics
8. blockchain, decentralised finance and cryptocurrency
9. the hydrogen economy.

This article focuses on quantum computing.

Quantum computing

Quantum computers are machines that use the properties of quantum physics to store data and perform computation. The units of information in quantum computing systems are known as qubits, and unlike the binary bits in traditional computers, qubits can represent any superposition of both the 0 and 1 states with a certain probability.

Essentially, this means quantum computers can perform multiple calculations simultaneously. As an example, 500 qubits can represent information that would require more than 2⁵⁰⁰ traditional binary bits.¹

Quantum computers are not designed to be a direct replacement for traditional computers. Rather they are designed to outperform traditional computers to solve a range of problems that cannot be feasibly solved on conventional supercomputers.

Four key areas that are expected to benefit significantly from the development of quantum computing are pharmaceuticals, chemicals, automotive and finance, and quantum-based cybersecurity is also expected to be an important market.²

The potential for quantum computing is enormous, with estimates that it could create value of US$450-$850 billion,³ but it’s important to note that the hardware and software needed for practical application — fully fault-tolerant quantum computers — do not exist.

Quantum computing startups continue to proliferate, with over 200 in the market in 2021,⁴ and the big players (Google, IBM and PsiQuantum) expect to develop error-corrected usable quantum computers within this decade. But we are still in the early stages of quantum computing, and practical application is unlikely before 2030.

While there has been sizable investment in quantum computing from private equity (US$3.3 billion in 2021),⁵ it’s also worth noting that the majority of funding still comes from public sources such as government and research institutes.

Are there risks?

The risks are largely around which technology will prove itself to be the winner in terms of achieving many qubits while maintaining acceptable quality. Although the most popular technology at the moment is superconductors, there are others, including ion traps and photonics. A major milestone in the development of quantum computing will be a 1-million qubit machine, so interested parties, including investors, are watching closely.

What does this mean for NGS Super’s portfolio?

At NGS we have actively made investments in quantum computing startups with promising technological advantages. These startups have the potential to define a new path forward for the industry. We are continuing to actively monitor technological developments in the quantum computing industry and analyse how and when other industries can utilise the technology.