By Charlie GarciaQuantum stocks are where AI was five years ago - and the science actually worksQuantum computers can read encrypted communications, financial transactions - and military secrets.The first nation to achieve quantum supremacy doesn't just win a science prize. It wins the ability to break every encryption system.Let me tell you something that should keep you up tonight.Somewhere in a Google lab, a chip called Willow just computed the structure of a molecule 13,000 times faster than the most powerful supercomputer on Earth. The scientists who built it believe that within five years, quantum computers like this will solve problems that are currently impossible. Not difficult. Impossible.Somewhere in Beijing, Chinese researchers are working on the same thing. They have a trillion yuan in backing and no shareholders asking about quarterly earnings.And somewhere, probably on your couch, you're checking your index funds and wondering why this article is trying to scare you.Here's why: The first nation to achieve quantum supremacy doesn't just win a science prize. It wins the ability to break every encryption system protecting every bank, every military secret and every private message you've ever sent.The experts have a name for that day. They call it Q-Day, which sounds like something from a movie you'd watch on an airplane, except this one is real and nobody knows exactly when it will arrive.The tech nerds are high-fiving in Silicon Valley. The generals are briefing Congress. And most investors haven't noticed.You're about to.As Sundar Pichai, CEO of Google and its parent Alphabet (GOOGL) (GOOG), recently observed, quantum today is where AI was five years ago: poised to make a small number of people obscenely wealthy.What qubits do that regular computers can'tClassical computers operate on binary bits. Ones and zeros. Yes or no. Like a very fast, very stupid employee who can only answer true-or-false questions.Quantum computers use qubits, which exploit something called &#34;superposition&#34; to exist in multiple states simultaneously. Problems that would take classical supercomputers longer than the age of the universe to solve suddenly become Tuesday afternoon's work.This includes drug discovery, materials science, logistics optimization and breaking every password ever created. That last application has attracted the keen interest of the Pentagon. When the U.S. Department of Defense compares quantum supremacy to aircraft carriers and sees it as a decisive factor in warfare, even the most committed pacifist should consider repositioning his portfolio.A trillion yuan buys a lot of physicistsChina and the U.S. are in a high-stakes race - the winner acquires capabilities that make current cybersecurity look like a screen door on a submarine.John Martinis, the winner of the 2025 Nobel Prize in Physics, recently warned that China is &#34;nanoseconds&#34; behind in the quantum race.Let me translate from physicist to English: We're in a dead heat with a country that has declared its intention to become the global leader in quantum-information science, already dominates quantum communications, and just unveiled a one-trillion-yuan fund to boost &#34;hard technologies.&#34;That's $140 billion. It's not a research grant, but a declaration of intent.The first nation to develop a quantum computer capable of breaking classical cryptography will possess capabilities that make current cybersecurity look like a screen door on a submarine. Every encrypted communication, every financial transaction, every military secret becomes readable.The U.S. government has noticed. DARPA's Quantum Benchmarking Initiative just advanced 11 companies to Stage B evaluation, the broadest and most technologically diverse cohort they've ever assessed. The Pentagon has elevated quantum to the center of its future weapons strategy. The U.S.-China Economic and Security Review Commission is urging Congress to adopt a &#34;Quantum First&#34; national goal by 2030.When Congress agrees on anything, take note.Why quantum is now an investment, not a theoryAI is accelerating quantum development while quantum accelerates AI.Here's the investment case in plain English: The science works. The question now is manufacturing.Quantum computing requires its own industrial revolution. It needs wafer-scale cryogenic integration, high-yield fabrication and architectures designed not for academic elegance but for factory floors.This is good news for investors. Physics breakthroughs are unpredictable. Engineering problems can be solved with sufficient money and motivation. The U.S. has both.Google's Willow chip matters not because of what it computes, but because of how it's made - using industrial-grade fabrication that looks more like semiconductor manufacturing than a bespoke physics experiment. This is the template. This is how scientific curiosity becomes a transformational industry.Meanwhile, AI is accelerating quantum development while quantum accelerates AI. In February, SandboxAQ released a model that sped up catalyst discovery for clean energy by 20,000x versus traditional methods. IonQ (IONQ) claims its quantum computers solve certain problems using less than 1% of the power consumption of classical supercomputers.These are not incremental improvements. These are the numbers that launch industries.An ETF and stocks to considerThe honest investment columnist admits he doesn't know which horse will win. He merely observes there's a race, points out the horses that haven't collapsed, and suggests betting on the field might be wiser than picking the champion.The Defiance Quantum ETF QTUM provides broad exposure and trades at roughly 23 times cash flow. Not cheap, but not insane for a sector where winners might return 50 times. It's up almost 40% so far this year, which either means you missed the easy money or the market has correctly identified something important.Quantinuum, majority-owned by Honeywell International (HON), shows genuine technical promise. The company's trapped-ion approach achieves a roughly 2:1 physical-to-logical qubit ratio. Most architectures need hundreds of physical qubits to create one error-corrected logical qubit. Quantinuum does it with two. This efficiency improvement turns &#34;theoretically possible&#34; into &#34;commercially viable.&#34;Honeywell shares are down this year, partly because it's splitting into aerospace and automation divisions - and the market hates complexity. But Honeywell's quantum exposure through Quantinuum may be undervalued precisely because nobody thinks of Honeywell as a quantum play. They think of thermostats.IonQ advanced to Stage B of DARPA's initiative - meaning serious people with security clearances believe the company's technology merits serious evaluation. Its trapped-ion architecture operates at room temperature, a meaningful advantage when competitors require cooling systems that make Antarctica look balmy. The stock is up this year but suffered a brutal correction from its October highs.Hitachi (JP:6501) is the quiet horse. While Americans argued about whether quantum was real, the Japanese were building it. Hitachi's quantum initiatives span silicon-based hardware, optimization systems and quantum-safe encryption. The Tokyo-traded shares are up about 27% this year. That's what happens when you do useful work while everyone else issues press releases.Everything that could go wrong (A partial list)These are not investments for people who check portfolios daily.Quantum stocks have been volatile enough to concern shareholders' cardiologists. IonQ shares, for example, nearly tripled from January through mid-October - then lost a third of its value in two months. These are not investments for people who check portfolios daily.The technology still faces challenges. Error correction at scale remains unsolved. Most quantum computers require temperatures colder than in outer space. The talent pool is approximately the size of a faculty meeting at MIT's physics department.And the eventual winners here might not be publicly traded yet. Betting on quantum in 2025 resembles betting on automobiles in 1905. Henry Ford had yet to introduce the Model T. Most promising companies from that era no longer exist.But someone was going to build cars. Someone is going to build quantum computers.More: These Big Tech stocks are the smart way to invest in the quantum-computing boomWhat a prudent investor does nowQuantum computing is transitioning from a science experiment to a strategic asset. The physics works. The engineering is progressing. Government and private money are flowing in quantities that would make a Gilded Age robber baron blush.The prudent investor allocates a small portion of his portfolio to quantum exposure, accepts that volatility is the price of admission, and recognizes that long-term trajectory matters more than monthly price swings.The imprudent investor ignores quantum entirely, on the theory that things he doesn't understand can't possibly matter. History has not been kind to that theory.Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more. He has no position in any of the companies or investments mentioned in this article.Agree? Disagree? Share your comments with Charlie Garcia at charlie@R360Global.com. Your letter may be published anonymously in the weekly &#34;Dear Charlie&#34; reader mailbag.By emailing your comments to Charlie Garcia, you agree to have them published on MarketWatch anonymously, or with your first name if you give permission. You understand and agree that Dow Jones &amp; Co., the publisher of MarketWatch, may use your story, or versions of it, in all media and platforms, including via third parties.More from Charlie Garcia:(MORE TO FOLLOW) Dow Jones Newswires12-23-25 2045ET

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Quantum computing is emerging as a major investment opportunity, akin to AI's rise five years ago. Quantum computers, using qubits, can solve complex problems rapidly, impacting fields like cybersecurity and drug discovery. The U.S. and China are in a race for quantum supremacy, with significant investments. Google's Willow chip exemplifies industrial-grade quantum development. Investors are advised to consider quantum computing as it transitions from theory to practical application, with AI accelerating its progress.

- Quantum computing is near a breakthrough stage, with potential to disrupt encryption systems protecting various sectors, including finance and military.  
- Countries like the U.S. and China are in a competitive race, with significant investments driving rapid advancements in technology and applications.  
- Investors are encouraged to consider quantum stocks, understanding the risks and potential long-term gains, as the market shifts toward recognizing quantum computing as a strategic asset.

Quantum computing is the stock market's next big tech play - and these stocks are still cheap