Google announced a new "quantum chip" called Willow on Tuesday. According to Google, this chip "can exponentially reduce errors as the number of qubits increases" and its performance far surpasses that of the predecessor released in 2019, marking a significant breakthrough in the field of quantum computing. This news led to a significant surge in Google and related stocks this week, but Analysts have stated that quantum computing is still a long way from any commercial application, reminding investors not to get overly excited by the recent rally.

Wall Street is hyping quantum computing.

$Alphabet-C (GOOG.US)$ It has risen 11% in the past five days.

Other Quantum Computing related Stocks, including lesser-known competitors. $Rigetti Computing (RGTI.US)$ After surging 45% on Tuesday, its stock price reached a new high on Wednesday, having accumulated over 500% growth this year. At the same time, $Defiance Quantum Etf (QTUM.US)$ Some outstanding stocks in $MicroStrategy (MSTR.US)$ and $D-Wave Quantum (QBTS.US)$ , have also increased by 520% and 344% respectively this year.

In addition, $NVIDIA (NVDA.US)$ 、 $Coherent (COHR.US)$ 、 $IonQ Inc (IONQ.US)$ and $RadNet (RDNT.US)$ Stocks have also more than doubled this year.

Analysis suggests that quantum computing is not a brand new phenomenon, but its importance is increasingly emphasized as more data is used to train large language models. Quantum computing utilizes quantum bits (qubits), which are far more complex than the binary bits used in current computing, enabling it to perform complex calculations that existing technologies cannot achieve. This technology may eventually be used for drug development at the molecular level, generating highly accurate weather forecasts several days in advance, and even breaking existing data encryption protocols.

At the same time, investors are eager to seize the next iteration opportunity in generative AI. Since the AI boom was ignited by ChatGPT two years ago, investors have been searching for the next batch of stocks that can benefit from the evolution of this technology.

Eric Jackson of EMJ Capital referred to quantum computing as the 'next major theme' on social platform X and stated that he has invested in Rigetti Computing, believing that the company has 'huge opportunities.'

Google's quantum chip is actually still unable to achieve true quantum computing.

However, as Google clearly stated in the announcement, quantum computing is still a long way from any commercial use.

Hartmut Neven, head of Google Quantum AI, wrote in a blog post on Monday: 'The next challenge facing the field is to demonstrate a 'practical beyond classical' computation that is meaningful for real-world applications on existing quantum chips.'

Alphabet's CEO Sundar Pichai stated in a post on social platform X that Willow is 'an important step in our journey to build a practical quantum computer with real applications in drug discovery, fusion energy, battery design, and more.'

Therefore, this raises doubts about the 11% increase in Alphabet this week. Additionally, the significant rise in Quantum Computing stocks may also have been due to the attention from Tesla CEO Musk, who responded "Wow" to a post about Google's quantum chips, potentially sparking a surge in investor interest; according to Vanda Research, the options trading volume for Alphabet's Calls reached its second-highest level of the year on Tuesday.

Google is in urgent need of any form of bullish news. Analysts believe that Google is currently facing multiple dilemmas, including concerns about its competitive position in the field of generative AI, as well as worries that the US government might split the company, casting a shadow over Alphabet's stock. Prior to this week, Alphabet's stock performance lagged behind most of its technology giant peers as well as the annual performance of the S&P 500 Index and Nasdaq Index.

Currently, Alphabet is the only technology giant with a PE ratio of less than 20. In contrast, competitor Meta Platforms had a PE ratio of around 25 earlier this week, while Apple, Microsoft, Amazon, and NVIDIA all had PE ratios exceeding 30.

Analyst: Google leads despite cautious optimism for quantum computing.

While quantum computing cannot solve the issues Google faces, analysts indicate that this news does remind people of the company's considerable strength in technological innovation. Justin Post of BofA Securities stated, "The progress of the Willow chip indicates Alphabet's position at the forefront of technological innovation, which is crucial for market sentiment."

Colin Sebastian of Robert W. Baird added, "Although quantum computing is still several years away from widespread commercialization, the newly launched Willow quantum chip showcases Google's leading position in quantum research."

However, Paul Meeks from Harvest Portfolio Management also reminds investors not to get overly excited by the recent surge, pointing out that real applications in this field may still take several years. He suggests that if investors want to enter this field, they should consider investing in large Technology companies that have other core Businesses. He states that this situation is similar to the end of 2022, when the stocks of companies like NVIDIA and C3.ai were driven up. But over time, some of the early leaders in this field will gradually stand out.

"There is no problem investing in Alphabet, as the existing strong business still gives the company upside potential, but for pure quantum computing companies, if their stock prices are pushed too high, they may become targets for shorting."

"I need to see actual use cases, as well as use cases that can achieve profitability. I like technological advancements, but based solely on these types of announcements, I will not assign an excessive valuation premium to any of these companies."

Editor/Somer