Editor’s Note: Today is our final prediction issue from Jeff Brown. We hope you’ve enjoyed this series and we look forward to seeing you all in the new year. But for now, it’s time to get one more prediction from Jeff. What happened with quantum computing in 2022? And what does the new year hold? Plus, Jeff will name one of his favorite “picks and shovels” quantum computing company.

Van Bryan (VB): Jeff, today is our last prediction for the year. And we saved a good topic for last: quantum computing. Could you bring readers up to speed? What is this technology and why is it important?

Jeff Brown (JB): You’re right, this is a great topic. It’s a perfect example of bleeding edge technology. But in order to understand quantum computing, we first need to understand classical computing.

In classical computing, the underlying unit of information is the “bit.” We can think of it as the “language” of classical computers. It is a binary digit that is represented as either a 0 or a 1. Everything from our smartphone to the world’s most advanced classical supercomputer relies on the simple flip of a bit from one state to the other in order to calculate, process instructions, and deliver results.

Quantum computing is different. It’s not at all like the computers we use today. It isn’t even like today’s supercomputers. These machines rely on quantum physics to process information and perform tasks. Put simply, quantum computers speak an entirely different “language” compared to classical computers.

Quantum computers do not rely on bits like their classical counterparts. Instead, the underlying unit of information in quantum computers is the “quantum bit,” or “qubit.” While a bit can represent either 0 or 1, a qubit can represent a superposition of 0 and 1. And for that reason, quantum computers are exponentially more powerful than the computers we use today.

I know that this might be a hard concept to understand. But the most important thing to grasp is the implications of this technology.

Google’s announcement of quantum supremacy in 2018 demonstrated that its 54-qubit quantum computer performed a task that would take a classical supercomputer 10,000 years to complete. And it did it in just over three minutes.

The speed and raw computational power of quantum computing makes today’s supercomputers look quaint, even antiquated. 

VB: And you had a prediction for this year. You said we’d see a 256-qubit quantum computer. Did that happen?

JB: Absolutely. First, we had a 218-qubit quantum computer. That was a photonic quantum computer from a company called Xanadu. And just a few weeks back, IBM announced a 433-qubit quantum computer.

So, not only did we hit 256 qubits, but the industry also blew right past that number. And I don’t think many people expected this type of progress this year. After all, these are very difficult problems to solve, and quantum computing is still an emerging technology.

I’ve been critical of IBM in the past. But I have to give them credit. They stuck to their product roadmap and came out with some great technology to end the year.

VB: It’s difficult to even comprehend a technology that powerful.

JB: You’re right. This technology would literally make a classical supercomputer look antiquated. How do we even get our arms around a concept like that?

The best metaphor I could think of is if you took a person from the 1700s and dropped them in the year 2022. How would they respond to the advanced technology around them? They’d have absolutely no frame of reference.

It’s not a perfect comparison, but it gives us some idea of how advanced this technology is compared to what we’re familiar with today.

But before we get too excited, I would point out that there’s a lot of work still to be done. And quantum computers require very special environments to function that are required to reduce system noise and vibration, things that can cause errors in a quantum computer.

And forms of quantum computers have to be cooled to temperatures colder than deep space. These are very specialized “computers” that are particularly good at solving very complex problems that are too challenging for classical super computers.

VB: Where do you expect the industry to go in 2023?

JB: I predict that a big focus in 2023 will be around error correction in order to build fault tolerance into quantum computers. In other words, it will be an effort to limit the amount of “noise” and have high fidelity.

The goal is to reduce the number of errors and to even implement error-correction software. After all, it doesn’t matter how quickly a quantum computer can perform a task if we can’t ensure it’s calculating correctly.

This is arguably more important than just increasing the number of qubits. Because, if we can solve this problem, then quantum computing gets to the stage where they can be used as universal computing devices.

And from there, we’ll be able to solve problems that the world hasn’t been able to tackle before…

VB: Like what?

JB: We could “unleash” this technology on problems that are so grand, so complex that they haven’t even been attempted yet because we just don’t have the computing capabilities.

These are problems that are so complex that it would take a classical supercomputer hundreds, thousands, or even tens of thousands of years to solve. So, obviously, they’re not even worth undertaking with classical supercomputers.

But this technology could be applied to some really big questions in cosmology or astrophysics. What is the origin of the universe? And what is the future of the universe based on what we are seeing now? That’s the type of task that a quantum computer would tackle.

Or even think of more everyday problems. Do we want to optimize traffic patterns for an entire metropolitan areas to limit or erase congestion? Or how about the same for the global air transportation market. We could apply it to climatology and get absolutely accurate weather forecasts weeks in advance.

And there’s one more potential application that might interest readers. A quantum computer could end up being vital to maintaining a fusion reaction, which we talked about yesterday. The combination of quantum computing and nuclear fusion could lead to limitless, clean, basically-free energy for the world.

We’ll also be able to develop entirely new materials and molecular compounds that have never existed before. Quantum computers will be very good at optimizing on very complex multi-variable problem sets.

It’s these types of questions and projects that classical supercomputers aren’t suited for that we’ll see quantum computers applied to.

VB: But with any powerful technology, there’s always concern it could be abused. Are you worried about that at all?

JB: This was something we talked about last year. Because you’re right. And the area I’m most concerned about is around cybersecurity.

For several decades, 256-bit encryption was considered “military-grade.” It has been impossible to crack with classical computing systems. And that encryption is used by governments, militaries, corporations, blockchains, and e-commerce websites.

And what I said last year was that—assuming we get to 256 qubits—that type of encryption is basically useless against a quantum computer. It could crack that encryption in a few seconds.

We’re there now. Of course, we probably don’t have to worry about IBM, Xanadu, or even Google misusing quantum computers.

But what happens if this technology was acquired by a nation state, one who has been known for hacking information from the West and committing cybercrimes? 

There’s a list of countries known for this. All the data protected by military grade encryption is potentially accessible.

With that said, while the raw quantum computing power now exists, these systems are still too noisy to crack 256-bit encryption. That’s the most critical thing the industry needs to solve right now to unleash the power of quantum computers; but I don’t think it will take much longer.

VB: Was there any progress to address the cybersecurity risk in 2022?

JB: Fortunately, there was. In July, the National Institute of Standards and Technology (NIST) announced an important milestone. NIST selected four algorithms to replace our current cybersecurity standards. The agency believes these algorithms could power quantum-proof encryption across the internet as well as email and other communication services.

That said, there’s still more work to be done here…

NIST will need to synthesize these new algorithms into formal standards. The current plan is to do so by 2024. And after those standards are finalized, then the IT industry is going to adopt those standards and implement them into their products.

For most, this will be a once-in-a-generation process of upgrading all hardware and software systems. This is something that will take at least a decade.

It really is a race against time.

VB: What about investment implications for this technology?

JB: We do have one pureplay on this technology in our model portfolio for Exponential Tech Investor. Out of respect to our paying subscribers, I can’t name it here. But there are some other companies that could be interesting.

One large-cap company that was previously in our Near Future model portfolio was Keysight (KEYS). The company is most known for its testing and measurement technology. Right now, this is being applied to help the wireless communications industry “fine tune” their 5G networks.

But Keysight is also doing something very interesting with quantum computing…

Back in 2016, Keysight acquired a small company called Signadyne, which specialized in electronic control systems. More specifically, the founder of Signadyne specialized in long-distance quantum communication.

And then in March of 2020, Keysight acquired another quantum-focused company, Labber, which spun out of MIT’s Quantum Engineering Group.

This was a very smart acquisition that has already led to a partnership between MIT’s Quantum Engineering Group and its Lincoln Laboratory, which is also focused on quantum research.

As a result, Keysight is emerging as the leader in quantum control systems and test and measurement for quantum computing.

This line of business isn’t a major driver of revenue yet, but I believe that will change in the years ahead. It’s certainly a company worth keeping an eye on as we go into 2023.

VB: Thanks as always, Jeff.

JB: Of course.

Editor’s Note: That concludes our 2023 prediction series with Jeff Brown. We’ll be back to our normal publishing schedule on Tuesday, January 3rd. On behalf of Jeff and the entire team and Brownstone Research, we wish you a happy new year, and we will see you all again in 2023.