Google parent company Alphabet’s stock has surged nearly 6% after announcing its latest quantum computing chip, Willow. The breakthrough claims to solve complex problems in just five minutes, a feat that would take the universe centuries on traditional computers.
While the impact of quantum computing on Alphabet’s stock is unclear, the development could reassure investors about the company’s ability to transform and innovate. Here are some key points to consider:
Alphabet’s Stock Performance
Despite a 35% gain in the year so far, Alphabet’s stock has struggled over the past two years due to concerns that Google Search may become obsolete with the rise of ChatGPT. The company responded by launching its own generative AI product, Google Gemini.
However, it remains uncertain how Gemini will affect Google Search users and whether it can stem potential losses. Advertising revenue, which accounts for most of Alphabet’s income, has also weighed on the stock. Its 25 P/E ratio is lower than other “Magnificent Seven” stocks.
Can Quantum Computing Help?
The future of quantum computing is uncertain but potentially bright. While increasing computing speeds is a positive development, few practical applications have emerged. However, Willow’s breakthrough in stabilizing qubits could make Alphabet a leader in the field.
Alphabet’s diversification efforts are also worth noting. The company has $93 billion in liquidity and generated $48 billion in free cash flow in the first nine months of 2024. This liquidity will enable it to fund new revenue streams, including potential applications for quantum computing.
Will Quantum Computing Make Alphabet Stock a Buy?
Quantum computing is unlikely to be a direct reason to buy Alphabet stock, but its ability to reinvent itself could be. If Willow becomes a successful application for quantum computing, it could help diversify Alphabet’s revenue base and reduce dependence on advertising. The company’s liquidity and free cash flow also provide a solid foundation for continued growth.
Overall, while the impact of quantum computing on Alphabet’s stock is uncertain, its potential to drive innovation and diversification makes it an attractive investment opportunity.
Source: https://www.fool.com/investing/2024/12/14/is-quantum-computing-a-reason-buy-alphabet-stock