We recently compiled a list of the Jim Cramer Talked About These 9 Nuclear Power and Quantum Computing Stocks. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other nuclear power and quantum computing stocks.
Jim Cramer, host of Mad Money, recently cautioned investors about the risks of speculating in sectors like nuclear power and quantum computing, suggesting it could take a long time before these fields generate meaningful returns. While Cramer acknowledged the optimism that accompanies the start of each new year, he pointed out that sometimes the enthusiasm surrounding certain industries is misplaced.
“This year, I see two themes that I want to caution people about: nuclear power and quantum computing. Both have promise, someday, but that day is not, just not near enough to justify the current valuations for these stocks.”
He clarified that while he does not view quantum computing as a hoax, he considers the current expectations surrounding the technology to be overly ambitious. The market, according to Cramer, is setting a low bar for progress in this area.
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“Look, I believe in nuclear power, but when GE Vernova, the company that arguably has the most to gain from it, says discouraging things about an uptick in commercial nuclear power coming any time soon, when quantum computing seems very much in its infancy, well, I fear people will get hurt speculating on even the biggest companies, let alone the smaller ones.”
The outlook for quantum computing became more uncertain last week when Nvidia CEO Jensen Huang stated that “very useful” quantum computers are at least a decade away. During a Q&A at Nvidia’s Consumer Electronics Show Financial Analyst event, Huang suggested that 15 years might be an optimistic estimate, while 30 years could be more realistic. This timeline left little room for optimism among investors who had hoped for quicker breakthroughs.
Cramer acknowledged the speculative nature of these sectors but advised investors to be cautious and realistic about the potential for short-term gains.
“You can speculate of course, but please understand that, like at all New Years, the animal spirits are in play for a few stocks and I don’t want you to be trampled by wayward bulls with visions of riches in front of their greedy eyes. You own Rigetti?… Take some gains and then go out and buy yourself a nice cashmere sweater.”
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 2. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 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).
A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Cramer highlighted that Alphabet Inc. (NASDAQ:GOOGL) has a facility for quantum computing and went on to say that it is not a reason to invest in the stock.
“Alphabet has a facility dedicated to quantum computing. This is super fast computing using superconductors that require a specialized computer environment based in part on cryogenic technology. Sounds promising, the others burn too hot, right, the regular data centers. But it’s not a reason to buy Alphabet because it’s nothing that’s ready at scale. I like Alphabet, own it for the Charitable Trust, but that’s because we like their dominance in Search, progress in YouTube, and incredible strength of Google Cloud services, well ahead of what people think. Quantum computing is just a long-term project.”
Alphabet (NASDAQ:GOOGL), a leading technology company, recently introduced a new quantum computing chip named Willow, which it claims could revolutionize the field. According to the company, Willow represents a significant breakthrough in the world of quantum computing. The chip is designed to solve complex problems that would typically take conventional computers 10 septillion years to complete.
Willow was created in one of the few specialized facilities globally, located in Santa Barbara, California. This state-of-the-art fabrication facility was specifically built to accommodate the complex needs of developing quantum computing hardware. One of the main challenges in quantum computing has been its high error rates, particularly as the number of qubits increases. However, the company claims Willow could significantly reduce these errors as it scales up, thus overcoming a major hurdle in the field.
Despite these promising developments, the application of quantum computing remains speculative, as there are no real-world uses for the technology at present. Alphabet (NASDAQ:GOOGL) has worked on Willow for over a decade, but experts acknowledge that the practical commercial use of quantum computing remains many years away. According to the head of Google’s Quantum AI lab, Hartmut Neven, the technology will likely not be ready for real-world applications before the end of the decade. Neven said while the breakthrough marks an important step in the progress of quantum computing, its commercial impact is still distant.
Overall GOOGL ranks 1st on our list of the nuclear power and quantum computing stocks Jim Cramer recently talked about. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that 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 GOOGL 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.
