Quantum Strategy Helps IBM Steer Around Tech Wreck

That’s one big slip for Big Chip, one quantum leap for IBM.

While Big Blue has long wished to trade like some high-flying semiconductor peers, on Tuesday, it was happy not to: A broader tech pileup in the markets sent the likes of Nvidia, Qualcomm and Micron down 4%, 8% and 13%, respectively. But shares of IBM defied the dip, rising 5%, largely thanks to a pair of executive orders from President Donald Trump late Monday that helped steer it toward a quantum-fueled future.

Tell Me What You Quant

The 20th century’s hardware king may have missed out on this century’s smartphone, AI and semiconductor booms, but it has a finely honed competitive edge with the tech world’s next innovation: quantum computing. Shares of the company scored their best week in roughly a quarter-century in May after the US government directed $2 billion from the 2022 CHIPS and Science Act to key quantum players; IBM received half that sum. One executive order on Monday directed federal agencies to fast-track work with private players to deploy a quantum computer by 2028, at least a year ahead of most existing timelines. The other focused on developing security systems to combat quantum-powered cyber attacks.

IBM wasn’t alone in scoring an EO bump Tuesday; shares of Infleqtion jumped more than 12%, and shares of D-Wave Quantum rose 2.2%. “IBM is well positioned as a quantum leader,” JPMorgan analyst Brian Essex wrote in a note to clients on Tuesday that upgraded IBM shares to overweight from neutral.

Even better news for IBM? Essex says that its core business is humming nicely, too: 

• IBM “has spent the better part of a decade repositioning itself from a hardware and services business into a software-led platform anchored by hybrid cloud and AI,” Essex wrote.
• In its first-quarter earnings call in April, IBM reported that its software business accounted for about 45% of its $15.9 billion revenue, and more than 60% of its profit.

Quantum Competition: The second round of executive orders in as many months isn’t exactly surprising: In fact, it probably reflects a new sense of urgency to make significant advancements in the quantum space. LineShine, a Chinese supercomputer built at the National Supercomputing Center in Shenzhen, was named the world’s fastest computer at the International Supercomputer Conference in Hamburg, Germany, this week. It’s the first time the nation’s computer scientists have secured the top spot since 2017, and a sign they’re making progress on quantum. 

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