Quantum Computing Opportunities for Corporations and Investors

Altman Solon is the largest global TMT strategy consulting firm with expertise in technology consulting. In this insight, we address the state of quantum computing and provide recommendations for corporations and investors as this groundbreaking tech matures and scales.   

Quantum computing (QC), which relies on the properties of quantum mechanics to perform calculations and store data, is quietly gaining momentum. These hardware and software computing units can perform certain complicated hypothetical calculations exponentially faster than classical computers.

Corporations and investors alike have an opportunity to capitalize on the growth in QC use cases today—and some already are. Major tech players are anticipating the coming of QC, including private key decryption. Leading by example, Apple is introducing post-quantum encryption into their iMessage product.

Government institutions, such as the U.S.'s National Institute of Standards and Technology (NIST), will release post-quantum cryptographic algorithms in the coming months. What's more, the National Security Memorandum (NSM-10) now mandates that U.S. government agencies migrate their systems to post-quantum cryptography.

At a time when massive investments in generative AI have attracted media attention, quantum computing funding, particularly in Europe and Asia Pacific, is on the rise. On track to surpass $2 billion globally, these investments are flowing to all players in the quantum computing space, from equipment manufacturers to component providers. Venture capital firms with high-risk appetites have led these deals, but later-stage investors are emerging more frequently.  

Meanwhile, the development of physical qubits (the particles used in quantum computers to store information) is undergoing significant technological progress, evolving from small-scale quantum chips to models designed for thousands of qubits. According to industry experts, we are in the nascent days of quantum maturity, and commercial opportunities will arrive in waves, with an adoption curve that is expected to be comparable to GPUs.

Nevertheless, corporations should not wait until the technology is fully mature but should prioritize preparing roadmaps, starting with transitioning from RSA cryptography to post-quantum encryption methods. Likewise, investors should seize the opportunity to develop their investment theses on quantum hardware, software, or vertical applications before QC becomes as expensive as generative AI. 

Embarking on a corporate roadmap for post-quantum cryptography 

There is a growing consensus that post-quantum cryptography, which ensures secure encryption from both classical and quantum computer attacks, provides optimum security. Transitioning cryptography systems should be a priority for companies of all sizes, given the inherent and worsening risks of data breaches.   

Companies should not wait a decade for QC to go mainstream. To stay ahead of the curve, they should prepare a roadmap for shifting to quantum computing, with key milestones over the short, mid-, and long term: 

• Short-term (~ 2025): Establish strategic quantum computing partnerships. At this early phase, companies should begin to position themselves proactively in the quantum ecosystem. This entails creating R&D partnerships with startups and providers, researching collaborations with hardware companies and hyperscalers, and initiating collaboration to develop QC software.  
• Mid-term (~2027): Initiate a robust quantum computing research program. Companies should conduct internal studies on the potential for QC across their offerings and market positioning. They should consider the future needs of current customers and key verticals to scout QC use cases. At this phase, companies should initiate internal R&D programs, paying particular attention to algorithms, products, and apps.  
• Long-term (~2028-2029): This phase is about scaling QC culture and expertise. Nearly every developer and QC architect should go through thorough upskilling with learning and development programs in quantum. Companies should also form relationships with schools and develop programming to tap into an early talent pool. 
  

Building a QC investment thesis   

We're still early in quantum computing, and many use cases have yet to be discovered. However, investments in QC hardware, software, and applications are already strong, reaching $1.5 billion in 2023, according to Pitchbook, with deal counts on the rise.

Quantum computing is poised to take center stage with sweeping government funding in Europe and Asia. What's more, major players, including IBM, Pasqal, QuEra, and others, have credible QC roadmaps for offering reliable hardware, which can be sold as a standalone machine or SaaS API to end users.

While generative AI is grabbing headlines, investors shouldn't sleep on opportunities in the emerging QC ecosystem. We've identified key areas to invest in along with gains, risks, and timelines: 

• QC R&D (2024-2030): Investors should target startups developing QC algorithms and investigating use cases. The challenges here include upfront costs, long development cycles, and the threat of technological obsolescence. However, this area can generate a high return on investment (ROI) from breakthroughs and attract VC and private equity firms specializing in deep tech.  
• QC hardware (2024-2030): Generally, startups focusing on qubit technology and constructing physical qubits undertake this. Hardware has the potential to dominate the market in a rapidly growing industry. Risks include high CapEx expenses in building and scaling manufacturing facilities, tech challenges, strong competition from semiconductor providers, and inevitable consolidation among today's competing technologies. Hardware is an area where investments from mega-funds will be decisive.  
• QC applications (2030-2040): Companies developing applications will initially tackle simulation, materials sciences, and cryptography. However, VC and private equity investors within specific industry verticals remain uncertain about the horizon of visibility and ROI.  
• QC computing services (2024-2040): Investors should look to tech providers and startups developing quantum processing unit (QPU) on-demand offerings. While the service market promises recurring revenue through subscriptions, uncertainties around demand, technical complexities, talent sourcing, and competition from established providers and open-source solutions abound. QC computing services will be funded by mega-funds and major tech players.