The field of artificial intelligence is still in its infancy, but several companies are already working on technology that can form the basis for the future of AI. These companies are developing quantum computing systems that can process mountains of data in seconds, which would take decades for a conventional computer.
Quantum machines can perform multiple calculations simultaneously, speeding up processing time, while typical computers must process data in a linear fashion. This means that quantum systems can advance AI beyond the most powerful supercomputers, allowing AI to drive cars and help cure diseases.
Three companies developing quantum computing technology have achieved impressive results. They are Microsoft (NASDAQ: MSFT), International business machines (NYSE: IBM)And IonQ (NYSE: IONQ). Here’s how they’re creating technology that could power the next phase of AI.
Microsoft’s many strengths
Microsoft may be known for its ubiquitous Windows computing system, but it has invested billions of dollars in artificial intelligence, including in OpenAI, the company that helped kick off the current AI wave with ChatGPT.
Microsoft’s work in quantum computing makes it possible to power future AI systems. The company started building quantum machines in 2006 and is a pioneer of a new type of quantum bit, or qubit for short, which resembles a bit in a conventional computer. Each quantum computer uses subatomic particles to perform calculations, measured in qubits.
In April, Microsoft announced a breakthrough in its quantum computers by improving error rates by 800 times. Because subatomic particles are very unstable, errors in calculations can occur.
According to Microsoft, the company’s error rate represents the most reliable qubit ever. This marks an important step in the production of quantum computers capable of realizing the next generation of AI.
Furthermore, Microsoft’s financial strength gives the company an edge in this area. The company has built one of the largest cloud computing businesses in the world, helping Microsoft generate $61.9 billion in the fiscal third quarter ended March 31, a 17% year-over-year revenue increase.
This helped the company achieve strong third-quarter free cash flow (FCF) of $21 billion, up 18% year over year. Microsoft can use its hefty FCF to fuel investment in quantum computing.
IBM’s successes in quantum computers
IBM’s work in AI dates back to the 1950s. Today, AI is a focus of the company. So it makes sense that it would also invest in quantum systems.
In fact, IBM is considered one of the leaders in quantum computing. It was the first company to make a quantum computer available in the cloud in 2016. Since then, Big Blue has deployed more than 80 quantum systems.
For example, IBM partnered with Cleveland Clinic to deliver AI and implement a quantum computer that was touted as the first dedicated to healthcare research. And last December, IBM released the first quantum computer with a 1,000-qubit processor.
Big Blue can fund quantum computing research because of its robust FCF generation. This not only funds corporate investments, but also the company’s hefty dividend, which currently yields around 4%.
In the first quarter, the company produced $1.9 billion in FCF, an increase of 43% from the previous year. IBM expects the FCF to reach about $12 billion by 2024, allowing Big Blue to continue funding its quantum computing work.
As an investment, IBM is more of an income stock than a high-growth technology stock. First quarter revenue of $14.5 billion represented just 1% year-over-year growth due to weakness in its consulting and infrastructure businesses.
However, the software division, which includes revenue from AI and quantum computing, is doing well. This segment generated revenue of $5.9 billion in the first quarter, up 5.5% from 2023.
IonQ’s rapid growth
Founded in 2015, Upstart IonQ is a relative newcomer. It is also the only pure quantum computing company on this list, meaning its resources are fully devoted to this technology.
Despite its short history, IonQ has amassed an impressive customer list. Customers include: Hyundaiwhich will use IonQ’s technology to build self-driving vehicles, and Oak Ridge National Laboratory, which will use IonQ’s quantum systems to improve the US power grid.
Successes like these helped the company achieve $7.6 million in revenue in the first quarter, an increase of 77% year over year. IonQ expects to realize at least $7.6 million in the second quarter, compared to $5.5 million in 2023.
The company achieved its latest quantum engineering milestone a year ahead of schedule, which would see it reach a tipping point in 2025 where “classical computers will no longer be able to fully simulate an IonQ system,” the company said.
With IonQ, IBM and Microsoft building technology to realize the next phase of AI, now is a good time to consider buying shares in these quantum computing giants.
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Robert Izquierdo holds positions at International Business Machines, IonQ and Microsoft. The Motley Fool holds positions in and recommends Microsoft. The Motley Fool recommends International Business Machines and recommends the following options: long calls for $395 in January 2026 at Microsoft and short calls in January 2026 for $405 at Microsoft. The Motley Fool has a disclosure policy.
3 Companies Already Working on the Next Phase of Artificial Intelligence (AI) was originally published by The Motley Fool
