Points of View

Quantum could hold the key for post-recession growth—tech giants, enterprises, and investors can’t lose sight of its potential

Although there remains a great deal of uncertainty about the impact of the current COVID-19 crisis, the doubt is really one of absolute scale. There is no doubt that the situation will lead to a financial downturn. The questions we still have are: How big an impact? For exactly how long? Tech giants, enterprise leaders, and investors can’t lose sight of the high potential that quantum offers, particularly as they look for recession-busting investments over the next few years.


In two previous major downturns— the 2008 financial crisis and the dot.com bubble at the start of the millennium—the post-recession period augured a bounce back in technology markets. The main dot-com players like PayPal, Amazon, and Google emerged from the dot.com bubble, and Uber, Netflix, Airbnb emerged from the great recession. So, while there may be a period of struggle over the next few months, there is likely to be a renewal in the immediate aftermath.


COVID-19 rightly has quantum enthusiasts focused on the immediate—which will undoubtedly delay early investments


The biggest impacts of COVID-19 on quantum computing development are likely to be the disruption in supply chains and staff having to work remotely. With key components being hard to find and engineers having to work from home, it’s hard to foresee a situation without some issues and delays. It may be that research in other areas is prioritized, and resources—financial, manpower, and equipment—are utilized elsewhere in the short term.


However, this does not stop work in the equally challenging quantum software. Given that some of the best talent in quantum has been focused on the hardware challenges, we may see a window for some of these people to work more on the software side. While this won’t help with hardware development, the available hardware could be more useable and ready for commercial exploitation.


Investment may be hard to find—government bodies will be the likely short-term safe harbor for existing projects as private capital goes into meltdown


The other big impact over the next year on the quantum industry is likely to be a lack of investment, particularly for start-ups looking for venture capital. It is also likely to see organizations looking to invest in quantum as a disruptor for their business shifting priorities. This lack of cash flowing into quantum research could slow things down, particularly given the uncertain nature of this type of investment already.


This may mean the government takes a more important role in shaping quantum, and quantum researchers previously shy of taking this route may look to public funding in this crisis if they struggle to find resources elsewhere. Many of the major investments have come from government sources, particularly those with educational establishments (see Exhibit 1).



Exhibit 1: Governments around the globe are investing in quantum


Source: HFS Research analysis of press releases and news


The hope is that governments will continue with this commitment, even if they delay ramping up the resourcing during the crisis. Although the funding environment will be undoubtedly complex going forward, governments around the globe are taking considerable financial hits keeping citizens safe and economies stumbling forward—in some cases moving just short of nationalizing entire economies. The fiscal implications of this for government budget sheets will be impossible to calculate; if a global recession rumbles on while government subsidy continues at record levels, projects deemed “luxuries” will likely be curtailed. Some quantum investments will fall into this category. However, as private capital recovers in the long term and investors begin to identify long-term, high-risk, high-payoff investments to recoup losses, we may see a flood of private capital pour into the technology, following similar paths as tech giants emerging from historic financial crises. It is the role of the government, then, to keep the quantum party going in the short term in hopes that enterprises, tech giants, and investors join in once capital markets recover.


A silver lining—greater investment scrutiny could see cash flow to the right parts of the quantum ecosystem


It is likely that some research efforts will shift to the software issues around quantum computing, which could bring about some use cases of the existing hardware technology and help with the on-ramp of better hardware when it becomes available.


For those organizations looking to keep investing in this technology, it should be a comfort that this is likely to pay off long term. Particularly if you look to the past, where some start-ups were weeded out, and there was a base of stronger firms ripe for investment and growth post-recession. The proof is in the post-dot.com and post-banking crisis technology booms.


The Bottom Line: Quantum is, and will remain, a high potential technology. Stakeholders involved in projects from private investors to government bodies must hold their nerve.


The COVID-19 pandemic has no impact on the viability of quantum computing as a technology, but it is likely to slow development. However, as with other recessions, this is likely to toughen up the organizations that survive. It may also show up some cracks in traditional ways of doing business and show up the viability of other investment opportunities.


We could see those firms that take a chance on quantum emerge as the next Netflix or Uber in 10 years. While we’re not cavalier enough to suggest doubling down on quantum investments, it’s probably not time to cut them off altogether, and any investment now is likely to bring long-term benefits—that was always the case with quantum, but now the wait might be a little longer.