IBM is the "true quantum leader," but the market is overreacting to HSBC news
HSBC's collaboration with IBM on quantum computing has led to a significant surge in IBM's stock price, increasing its market value by nearly $13 billion in one day. However, Morgan Stanley believes that the market's reaction is excessive, as it has already factored in a commercial outlook that may only materialize several years later and is filled with uncertainties. Model calculations indicate that the market's enthusiastic response that day is equivalent to expecting IBM to sell approximately 265 quantum systems priced at $13.3 million each by 2029
A piece of news about the commercialization of quantum computing has propelled the stock price of tech giant IBM to "rocket" levels.
After HSBC announced the successful use of IBM's quantum processor to optimize bond trading, IBM's market value increased by nearly $13 billion on September 25, with the stock price rising over 5% that day.
However, according to reports from the Wind Trading Desk, a report from Morgan Stanley analyst Erik W Woodring's team suggests that while this market reaction highlights IBM's leadership in the quantum field, it may also have overly digested the future potential of this technology, which is still in its early stages.
The bank's model indicates that the market's enthusiastic response that day corresponds to expectations that IBM could sell about 265 quantum systems priced at $13.3 million each by 2029. This is a highly optimistic scenario based on multiple assumptions and carries significant uncertainty.
Quantum Computing "Debut": HSBC's Application Achievements Are Significant
The report first cites HSBC's press release. According to the press release, HSBC utilized IBM's Heron quantum processor to achieve up to a 34% performance improvement in predicting the probability of winning customer inquiries in the European corporate bond market compared to traditional computing resources.
HSBC pointed out that this result demonstrates the potential value that quantum computers may provide in solving dynamic problems in the financial services industry. The report believes that such early commercial applications are "extremely important" for proving the value proposition of quantum computing.
IBM: The Undisputed Quantum Leader
The report clearly states that IBM is the "clear leader" in the quantum market. Research shows that IBM has the largest and most extensive advanced quantum computing ecosystem today.
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Number of Systems: Since 2017, IBM has installed over 75 quantum systems globally, which is more than the total of all other quantum suppliers combined.
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System Scale: This includes 13 "utility-scale" quantum computers with over 100 quantum bits each.
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Commercial Contracts: Since the project's launch, IBM has accumulated approximately $1 billion in quantum business contracts, far ahead of its peers.
Market Frenzy: The "Valuation Bubble" Behind a $13 Billion Surge in One Day
The report provides a calm quantitative analysis of the market's enthusiastic response. What expectations are reflected in the nearly $13 billion increase in IBM's market value that day?
Morgan Stanley estimates through "reverse engineering" that to support this market value growth, the market may implicitly expect that by 2029 (the year IBM is expected to deliver fault-tolerant quantum computers), IBM could sell about 265 quantum systems This figure is derived from multiple assumptions, including a selling price of approximately $13.3 million per system, a net profit margin of 10%, a price-to-earnings ratio of 50 times, and a discount rate of 8%.
The report emphasizes that while there are multiple unknowns in the analysis, it reveals the market's interpretation of the news in terms of direction—that pricing has already been established for a distant and uncertain future.
Reality and Potential: The Road to Commercialization is Long and Challenging
In conclusion, the report clarifies the current state of quantum computing for investors: “The potential is enormous, but so is the uncertainty.”
Although IBM plans to provide the first fault-tolerant quantum computer by 2029, which would be a significant turning point for commercialization, the current commercial applications of quantum computing are still in the early stages of development. HSBC's case is merely an example of a “relatively narrow application,” and widespread commercialization will still take several years.
Therefore, Morgan Stanley summarizes that while IBM and the entire quantum industry may achieve great success by 2029, “it is hard to believe that quantum computing should be a substantial driver of stock prices today.” For investors, this means distinguishing between current hype and distant commercial realities.
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