Quantum computing represents massive opportunities if the company involved can be the first to market with a feasible device. Alphabet (GOOG -0.34%) (GOOGL -0.26%) seems to be on that track, as a chip produced by its Google subsidiary just posted an unbelievable score on a benchmark test.
Willow is the chip’s name, and it made history by blowing today’s fastest supercomputer out of the water. But does this make Alphabet stock a buy?
The Willow chip just had a massive breakthrough
Quantum computing is far different from standard computing. The computing that we’re used to uses 1s and 0s to process information, known as bits. These logic gates can produce incredible results (just look at the AI models we’re using today), but they aren’t nearly as powerful as quantum computing’s versions: Qubits.
Qubits aren’t binary, like bits; instead, they can be better thought of as the probability of the answer being a 1 or 0. As a result, a qubit can contain infinitely more amounts of information than a bit can. However, qubits don’t give a straightforward 1 or 0 answer, so they can also produce errors more often than a bit would. This is a major problem that needs to be solved in quantum computing.
Google found that the more qubits they used, the more errors were reduced. So, after finding that they needed to place qubits in a grid system to interact more easily with each other, they found that errors were reduced exponentially, thus leading to the design breakthrough with Willow.
Willow was run through a random circuit sampling benchmark test, which would take the fastest supercomputers in the world 10 septillion years (10 to the 25th power). According to Google, that number far surpasses the supposed age of the Universe, meaning a standard computer could never actually complete the calculation. However, the Willow beat that test in under five minutes.
While this is true, it definitely stacks the odds in Willow’s favor. The benchmark test is designed specifically for quantum computers and takes advantage of their defining characteristics. Still, this doesn’t undermine the importance of Willow passing the test, as it represents a breakthrough in quantum computing technology.
But does all of that translate to the stock being a buy?
Quantum computing isn’t key to the Alphabet investing thesis
As of the time of writing, Alphabet’s stock has risen around 10% since it announced Willow’s results. That’s the equivalent of around $250 billion added to its market capitalization, so the market thinks this is a big deal.
However, we’re nowhere near walking around with quantum computing phones or laptops. This chart by Alphabet gives you an idea of where we’re at in implementing quantum computing.
Image source: Alphabet.
While the RCS benchmark was difficult, it has no commercial relevance besides proving that quantum computing can be done accurately. Now, work shifts to commercially relevant offerings.
Once those become successful, we can talk about quantum computing becoming a viable business for Alphabet. But until then, investors need to consider buying today’s Alphabet, which means investing in the current business state with a quantum computing lottery ticket that may not be able to be cashed for a decade or later.
Right now, Alphabet is doing quite well, as revenue rose 15% year over year in Q3. Earnings per share (EPS) rose even faster thanks to an increased operating margin, rising from $1.55 last year to $2.12 this year — a 37% rise.
Its core advertising business is doing well, but Google Cloud has also been a bright spot for the company. With the stock trading for 21 times 2025 earnings, it isn’t the cheapest stock around. However, it does compare favorably to many of its big tech peers, so I think it’s a stock worth buying now. However, if quantum computing is your primary investment thesis in Alphabet, then you’ll have to be extremely patient for it to work out.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.