We recently compiled a list of the 10 Best Quantum Computing Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Honeywell International Inc. (NASDAQ:HON) stands against the other quantum computing stocks.
Quantum computing stocks are once again in focus after yesterday’s major breakthrough announcement by one of the biggest players in this field.
Investors have had high expectations from quantum computing firms for many years, but the technology has consistently failed to deliver on the promise. However, a deeper understanding of the tech behind quantum computing is required to fully understand the complexity of the issue. Quantum computers were theorized in the 1980s, but their development has been fraught with challenges due to the fragility of qubits. Unlike traditional computers that use binary bits, like ones and zeroes, quantum computers utilize quantum bits, or qubits, which can exist in multiple states simultaneously due to superposition. Qubit fragility typically leads to higher error rates for quantum computers. Companies have tried to address qubit fragility through innovations — ranging from light particles to trapped ions, but few have been successful. However, latest breakthroughs in this field herald the arrival of quantum supremacy – a term used to explain the processing power of quantum computers compared to traditional ones.
Read more about these developments by accessing 10 Best Quantum Computing Stocks to Buy According to Analysts and 10 Buzzing AI Stocks According to Goldman Sachs.
Since the latest breakthroughs showcase that quantum computers can accomplish tasks in minutes that would otherwise take ten septillion years – exceeding the age of the universe – it would be reasonable to assume that quantum computers can now move on from accomplishing mundane tasks like generating random numbers or solving specific mathematical problems, towards practical applications in drug discovery, artificial intelligence, and cryptography. This has huge implications for investors who are increasingly frustrated by the plateauing advancement in the field of AI and are actively exploring for emerging opportunities in the tech field that offer explosive growth potential along the same lines. Sylvia Jablonski, the CEO of Defiance ETFs, appeared on news platform CNBC earlier this year to highlight this.
“The way I see markets today is the absolute fervor and interest in all things A.I. and A.I. is the tide that rises all boats. I think quantum is the next generation of A.I. You need it to process data and make changes in all of the sectors we have been talking about that A.I. has been impacting with drug discovery and curing diseases. Just as AI is powering progress in not just the computer industry, but in fields that adopt the use of AI, quantum computing will be used in processing data for sectors already being transformed by AI, such as drug discovery and curing diseases.”
Read more about these developments by accessing 12 Best Quantum Computing Stocks To Invest In and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.
For this article, we selected quantum computing stocks by sifting through the holdings of popular quantum computing ETFs. The stocks listed below are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 55
Honeywell International Inc. (NASDAQ:HON) operates as a diversified technology and manufacturing company worldwide. Over the past few years, the company has emerged as a leader in the development of precision control systems, stemming from legacy expertise in the manufacture of aerospace and industrial products. This gives the firm a competitive edge in developing advanced quantum hardware. The firm serves the quantum computing market through Quantinuum, a firm formed in 2021 through the merger of Honeywell Quantum Solutions and Cambridge Quantum.
The firm features on the list of best quantum computing stocks according to hedge funds as it combines hardware and software expertise to offer end-to-end quantum solutions. Some of the key areas where the company serves quantum customers include quantum chemistry, optimization, cybersecurity, and machine learning. Since it was founded, Quantinuum has raised over $620 million in funding, including $300 million from a group of high profile investors earlier this year. Latest reports suggest that Honeywell, which retains a 54% ownership stake in the quantum firm, plans to take it public at a valuation of over $10 billion.
However, not all hedge funds are impressed by the quantum venture of Honeywell. For example, earlier this year, Elliott Management, led by billionaire Paul Singer, penned an open letter to the board of directors of Honeywell, urging for the breakup of the business to separate the aerospace and automation activities. The letter stated that in Honeywell’s case, its underlying business units not only competed with one another for investment allocation, but also had to compete against broader corporate initiatives. The letter named Quantinuum as an example, noting that while the fund made no judgment on Quantinuum itself, it was reasonable to question whether Honeywell’s investing in quantum computing was a distraction – in either investment dollars or management mindshare – from its core businesses.
Overall HON ranks 5th on our list of the best quantum computing stocks to buy according to hedge funds. While we acknowledge the potential of HON as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.