IBM is the "true quantum leader," but the market is overreacting to HSBC news.

IBM is the "true quantum leader," but the market is overreacting to HSBC news.

```

A piece of news about commercial applications of quantum computing sent tech giant IBM's stock price “soaring.”

After HSBC announced it had successfully used IBM’s quantum processor to optimize bond trading, IBM’s market value increased by nearly $13 billion on September 25, with its stock price surging over 5% that day.

However, according to Windchase Trading Desk, a report by the Morgan Stanley analyst team led by Erik W Woodring said that although this market response highlights IBM’s leadership in the quantum field, it may also be overpricing the future potential of this still early-stage technology.

Based on reverse modeling, they pointed out that the frenzy amounted to expectations that IBM could sell about 265 quantum systems at $13.3 million each by 2029. This is a highly optimistic scenario based on multiple assumptions and great uncertainties.

Quantum Computing “Debut”: HSBC Sees Remarkable Results

The report first cited HSBC’s press release. According to the statement, HSBC used IBM’s Heron quantum processor, and in predicting the probability of winning client RFQs in the European corporate bond market, achieved up to a 34% performance improvement compared to traditional computing resources.

HSBC noted that these results demonstrate the potential value that quantum computing could offer in solving dynamic problems in the financial services industry. The report concluded that such early commercial applications are “extremely important” to proving the value proposition of quantum computing.

IBM: An Undisputed Quantum Powerhouse

The report makes it clear that IBM is the “clear leader” in the quantum market. Research shows that IBM owns the world's largest and most extensive advanced quantum computing ecosystem today.

  • Number of systems: Since 2017, IBM has installed over 75 quantum systems worldwide, more than the sum of all other global quantum suppliers combined.
  • System scale: These include 13 “utility-scale” quantum computers with over 100 qubits.
  • Commercial contracts: Since the project began, IBM has secured approximately $1 billion in quantum business contracts, far ahead of its peers.

Market Frenzy: The “Valuation Bubble” Behind a Single-Day $13 Billion Surge

The report takes a cool, quantitative look at the market’s frenzied response. What exactly do the nearly $13 billion in additional market value reflect?

Morgan Stanley used “reverse engineering” to estimate that, to support this increase, the market may be implying the following expectations: assuming that by 2029 (the year IBM says it will deliver a fault-tolerant quantum computer), IBM will be able to sell about 265 quantum systems.

This figure is derived from multiple assumptions: $13.3 million per system, a 10% net profit margin, a 50x earnings multiple, and an 8% discount rate, among others.

The report stresses that while there are many unknowns in these analyses, directionally it reveals how the market interpreted the news—as having already priced in a distant and uncertain future.

Reality vs. Potential: The Commercialization Road Is Long and Challenging

The report finally points out the current situation for investors: “The potential is huge, but so is the uncertainty.”

Although IBM plans to deliver the first fault-tolerant quantum computer before 2029, which would be a major commercial milestone, commercial applications of quantum computing are still in their early stages. The HSBC case is just a “relatively narrow application” and broad commercialization is still years away.

Therefore, Morgan Stanley concluded that while IBM and the quantum industry as a whole could see tremendous success by 2029, “it is hard to believe that quantum computing should be a substantive driver of share prices today”. For investors, this means distinguishing between current hype and distant commercial realities.

 

~~~~~~~~~~~~~~~~~~~~~~~~

The above wonderful content comes from Windchase Trading Desk.

For more detailed analysis, including real-time interpretation and first-hand research, please join [Windchase Trading Desk · Annual Membership]

Risk Warning and DisclaimerThe market carries risks and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account the particular investment objectives, financial situation, or needs of individual users. Users should consider whether any opinion, view, or conclusion in this article is appropriate to their particular situation. Investing on this basis is at your own risk. ```