(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Pranav Kiran
TORONTO, April 28 (Reuters Breakingviews) - Quantum computing is inching closer to its ChatGPT moment. IBM (IBM.N) and Alphabet-owned Google (GOOGL.O) are racing to exploit exotic physics to crunch problems that normal chips can’t. They’re not alone: upstarts like Rigetti Computing (RGTI.O) and IonQ (IONQ.N) have raised $7.2 billion via mergers with blank-check vehicles and subsequent deals in the last five years, according to investment bank Cohen &amp; Company Capital Markets. Even more would-be quantum questers are following suit. The hardware is nearing real-world usefulness, but turning lab breakthroughs into a viable business model faces key challenges.
Above all else is the question of what quantum computing can do. Regular chips’ manipulation of bits – simple ones and zeroes – underpins the modern economy. The novelty of devices developed by IBM or Rigetti is that they use qubits, which can be zero and one simultaneously. That lets them explore many computational possibilities at once.
Think of a maze that keeps getting bigger. A regular computer tests one path at a time. A quantum one metaphorically floods the maze with water, which then pools only at the exit. As a result, the technology is most promising for problems that require inordinate trial-and-error. Cybersecurity is the immediate worry. Sufficiently powerful quantum machines capable of breaking today’s encryption are coming into view, threatening digital communications and cryptocurrencies like bitcoin. More optimistically, the ability to wrangle such complexity could be useful for modeling molecules, a tantalizing prize for drugmakers like Pfizer (PFE.N) or materials science companies like 3M (MMM.N) . Pharmaceutical giants typically spend around 20% of revenue on research and development. The cost of discovering a new drug has roughly doubled over the past decade, according to Deloitte. A useful quantum computer could meaningfully shift industry economics.
There is no single blueprint to build qubits. IBM, Google and some peers run superconducting circuits that operate at temperatures colder than those of outer space. Xanadu (XNDU.TO) and PsiQuantum use light particles. IonQ and Infleqtion (INFQ.N) trap ions or atoms in a vacuum. The problem is that qubits are fragile and error-prone. Even minor disturbances can render outputs useless. A 2023 Google paper on improving qubit accuracy was key to a recent renaissance. With no settled blueprint, however, the cost to build and run a useful system remains hard to estimate. That arc mirrors artificial intelligence. The underlying technology of neural networks has been studied since the 1950s. They only became powerful once datasets exploded in size, graphics chips proved ideal for training, and transformer models – again inspired by a Google research paper – further tuned the process to make applications like ChatGPT feasible.
Quantum computing is stuck in similar developmental limbo, one that is proving expensive. IonQ, D-Wave Quantum (QBTS.N) , Rigetti and Xanadu Quantum Technologies burned about $500 million in operating cash across their most recent financial years, or roughly $70 million on average. That spending, in part, reflects dependence on a scarce supply of physics researchers. Worse, the commercial payoff is still thin. Quantum revenue, where it exists at all, mostly comes from the public sector. Government sales accounted for about 60% of Infleqtion’s revenue and more than 90% of Rigetti’s in 2025. Even D-Wave, founded in 1999 and the oldest of the publicly listed firms, only began a meaningful shift toward commercial clients around 2020.
That makes them hard to both finance and value. Consider the differences with other cash-burning firms chasing all-or-nothing scientific breakthroughs.
Biotechnology startups promising the next wonder-drug have found public markets plenty amenable for fundraising. Yet investors know how to model the value of a successful therapy, and the exit path of selling to an industry giant is well-worn. In the world of large language models, OpenAI had to start off as an oddball non-profit, with others only chasing in its wake later. Yet ChatGPT proved the early commercial attractiveness of its products, even as it continues to dump vast resources into research. There is no similar monetization opportunity at the halfway point for quantum computing. Over 90% of funding in the sector is focused on seed and early-stage rounds, data from Tracxn shows. Special-purpose acquisition companies have therefore become a fallback option. Since 2021, six firms, including Rigetti and IonQ, have gone public through mergers with these cash-stuffed shells; five still trade above their $10 IPO price. The exception is Zapata Quantum, which ran out of liquidity and delisted. A key departure from the trend would be industrial giant Honeywell (HON.O) , which is set to take majority-owned Quantinuum public through the traditional route, and might prove a crucial trailblazer. The SPAC route is far from risk-free. Shareholders can redeem their investment in cash prior to a merger’s completion. Redemption rates frequently hit 95%, according to insurance broker Arthur J. Gallagher, draining the money that companies expect to receive. When D-Wave Quantum went public in 2022, just $9 million out of $300 million remained in the SPAC’s trust account after investors pulled their money. As a result, private investments backstopping combinations are essential, and have featured in every quantum blank-check deal save for Zapata’s, according to Cohen &amp; Company research.
These stocks are also highly volatile, moving wildly on perceived technical achievements. In December, Jefferies assigned target valuations of 68, 60 and 56 times sales to D-Wave, IonQ and Rigetti, respectively, on the promise that they could grow annual revenue between 60% and 111% on average through 2030. Their current trading prices are closer to 30 times those aspirational figures. While hope fuels private investment, fear is concentrating government minds. Quantum advances raise national security risks, from hostile states accessing sensitive data to the danger of ceding the technological frontier to a geopolitical rival. The U.S. has already started imposing export controls in 2024 on equipment like cooling systems used to make quantum computers. More than 30 countries have launched national quantum strategies. The stakes are highest for the EU, Canada and the UK, already in thrall to American tech dominance in other fields. Xanadu is currently working with the Canadian government to secure C$390 million. The UK’s urgency intensified after homegrown Oxford Ionics was acquired by IonQ, triggering a $2.7 billion commitment to the field. DeepMind, the engine of massively influential early advances in AI, was similarly founded in Britain and acquired by Google. The fear, and the hope, of quantum computing is that it follows a similar path.
Pharma R&amp;D costs have surged
<img src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/jnvwrkmezpw/chart.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="914" original-src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/jnvwrkmezpw/chart.png"/>
Quantum upstarts stay above key SPAC benchmark
<img src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/egpbebrynvq/chart.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="952" original-src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/BRV-BRV/egpbebrynvq/chart.png"/>
(Editing by Jonathan Guilford; Production by Maya Nandhini)

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- Quantum computing is approaching significant milestones, with IBM and Google leading a competitive race to harness its potential alongside emerging companies.  
- Despite advancements, the sector faces challenges, including high costs and uncertainty in monetization, with a significant portion of funding focused on early-stage ventures.  
- Governments are paying close attention due to national security implications and the competitive landscape, prompting various nations to formulate national quantum strategies to avoid technological lag.

BREAKINGVIEWS-Quantum computing awaits its ChatGPT moment