The field of quantum computing spans a diverse array of disciplines, including quantum hardware and quantum algorithms. Despite its current developmental stage, quantum technology promises to solve complex problems that supercomputers either cannot solve or cannot solve quickly enough.

Integrating quantum computing with generative AI is poised to revolutionize business strategies and economic models. In this environment, investors could scoop up shares of stocks at the forefront of quantum computing like Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA), and International Business Machines Corporation (IBM).

These companies are strategically positioned to benefit from advancements in this field. Before diving into the stocks, let's explore the sector further.

Quantum computing is generating significant excitement, with McKinsey highlighting it as one of the upcoming major trends in technology. The sector's potential is immense, with estimates suggesting that quantum computing alone could represent nearly $1.3 trillion in value by 2035.

This substantial promise is attracting considerable attention and investment. The Biden-Harris Administration, through the U.S. Department of Commerce’s Economic Development Administration (EDA), has announced a $41 million grant to the Elevate Quantum Tech Hub.

The funding aims to enhance the region’s capacity for producing and delivering critical quantum technologies, maintaining America's competitive edge in the field.

In addition, according to a report by Fortune Business Insights, the global quantum computing market is projected to grow significantly, from $1.16 billion in 2024 to $12.62 billion by 2032. The growth represents a CAGR of 34.8%, reflecting the sector's rapid expansion and increasing investor interest.

Considering these positive trends in the industry, let us discuss the fundamentals of three tech stocks that are on the edge of innovating quantum computing, starting with #3.

Stock #3: Microsoft Corporation (MSFT)

MSFT is a multifaceted tech giant that is innovating in software, services, and devices. Its divisions encompass Productivity & Business Processes; Intelligent Cloud; and More Personal Computing. The company's flagship offerings include Office, Microsoft Teams, and advanced solutions like Microsoft Viva.

On August 8, MSFT announced a partnership with Palantir Technologies Inc. (PLTR), known for its role in counterterrorism software. Together, they will integrate cutting-edge cloud, AI, and analytics into the U.S. Defense and Intelligence Community. This move is expected to strengthen MSFT's presence in secure environments, positioning it for significant growth in defense technology.

On July 24, MSFT and Lumen Technologies (LUMN), a key technology and communications provider, announced a partnership to leverage Microsoft Cloud for Lumen’s digital transformation. The collaboration would help LUMN enhance its network capacity and also drive MSFT's growth by boosting cloud usage and data center revenue, capitalizing on the growing AI-demand.

MSFT’s total revenues increased 15.2% year-over-year to $64.73 billion for the fiscal 2024 fourth quarter that ended June 30, 2024. Its operating income grew 15.1% from the year-ago value to $27.93 billion. Moreover, the company’s net income and EPS came in at $22.04 billion and $2.95, both growing 9.7% from the prior year’s quarter, respectively.

In addition, the company’s total assets were $512.16 billion as of June 30, 2024, versus $411.98 billion as of June 30, 2023.

For the fiscal 2025 first quarter ending September 2024, MSFT’s revenue is expected to increase 14.2% year-over-year to $64.53 billion. Its EPS for the ongoing quarter is expected to be $3.10, increasing 3.7% year-over-year. The company has also surpassed the consensus revenue and EPS estimates in all of the trailing four quarters, which is impressive.

Shares of MSFT have surged 9.1% over the past nine months and 25.8% over the past year to close the last trading session at $413.12.

MSFT’s POWR Ratings reflect its robust outlook. It has a B grade for Stability and Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

MSFT is ranked #21 out of 39 stocks in the B-rated Software – Business industry.

In addition to the POWR Ratings highlighted above, one can access MSFT’s ratings for Growth, Momentum, Sentiment, and Value here.

Stock #2: NVIDIA Corporation (NVDA)

NVDA operates as a full-stack computing infrastructure company, driving advancements in computational capabilities. Its key segments span Compute & Networking and Graphics, pivotal in gaming, professional visualization, data centers, and automotive sectors.

On August 27, NVDA introduced NVIDIA NIM™ Agent Blueprints, a versatile catalog of AI workflows designed for creating and deploying generative AI applications. These include customer service avatars, retrieval-augmented generation, and virtual drug discovery screening.

This move could position NVDA to help enterprises customize open-source models, reinforcing its leading role in the AI revolution.

On July 29, NVDA revealed its commitment to advancing humanoid robotics by supplying services, models, and computing platforms to top robot manufacturers. The effort supports NVDA's mission to drive global humanoid robotics development.

As robotics become integral to various industries, NVDA’s tools are set to ignite a technological revolution, bolstering its global presence and growth.

In the fiscal 2025 second quarter that ended July 28, 2024, NVDA’s revenue increased 122.4% year-over-year to $30.04 billion. The company’s non-GAAP operating income increased 156.4% year-over-year to $19.94 billion.

Plus, its non-GAAP net income and non-GAAP net income per share came in at $16.95 billion and $0.68, indicating increases of 151.5% and 151.9% from the previous year’s quarter, respectively. As of July 28, 2024, NVDA’s total assets stood at $85.23 billion compared to $65.73 billion on January 28, 2024.

Street expects NVDA’s revenue and EPS for the fiscal 2025 third quarter (ending October 2024) to increase 81.8% and 84.3% year-over-year to $32.94 billion and $0.74, respectively. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.

Shares of NVDA have surged 48.6% over the past six months and 141% over the past year to close the last trading session at $117.59.

NVDA’s fundamentals are reflected in its POWR Ratings. The stock has an A grade for Sentiment and Quality and a B for Growth.

It is ranked #29 in the 90-stock Semiconductor & Wireless Chip industry.

Beyond what we stated above, we have also given NVDA grades for Value, Stability, and Momentum. Get all the NVDA ratings here.

Stock #1: International Business Machines Corporation (IBM)

IBM focuses on hybrid cloud and AI solutions, leveraging a platform-centric strategy to deliver client value through technology and business expertise. Core segments include Software, Consulting, Infrastructure, and Financing, enabling the company to address the evolving needs of enterprise clients.

On August 5, IBM unveiled a generative AI-powered cybersecurity assistant using the watsonx platform. The advancement reduces manual tasks and enhances threat detection, enabling quicker, more precise responses. By improving operational efficiency and strengthening client security, IBM solidifies its leadership in cybersecurity technology.

On July 23, IBM and ASMPT, a top global supplier of semiconductor and electronics manufacturing solutions, renewed their partnership to enhance chiplet packaging technologies.

They will focus on advancing thermocompression and hybrid bonding techniques with ASMPT’s Firebird TCB and Lithobolt tools. The collaboration supports IBM’s drive for innovation in smaller, more powerful, and energy-efficient chips, reinforcing its leadership in the chip production market.

In the fiscal second quarter that ended on June 30, 2024, IBM’s total revenue increased 1.9% year-over-year to $15.77 billion. It also reported a non-GAAP gross profit of $9.12 billion, indicating a 5.4% growth from the prior year’s quarter.

In addition, IBM’s non-GAAP income from continuing operations came in at $2.27 billion, up 13.6% year-over-year, whereas its non-GAAP EPS from continuing operations grew 11.5% from the prior-year quarter to $2.43.

The projected consensus for revenue and EPS stands at $15.07 billion and $2.22, respectively, marking a modest year-over-year increase of 2.1% in revenue and 1.1% in EPS for the fiscal third quarter ending September 2024. Furthermore, the company topped the EPS estimates in each of the trailing four quarters.

IBM shares have surged 19.1% over the past three months and 35.8% over the past year to close the last trading session at $198.90.

IBM’s solid fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

IBM has a Quality grade of B. In the 75-stock Technology – Services industry, it is ranked #12.

Beyond what is stated above, we’ve also rated IBM for Growth, Value, Momentum, Stability, and Sentiment. Get all IBM ratings here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

MSFT shares rose $3.22 (+0.78%) in premarket trading Friday. Year-to-date, MSFT has gained 10.46%, versus a 18.22% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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