Quantum Computing vs. Traditional AI: Which Tech Stocks Are Must-Haves in 2025?

Quantum computing has quickly turned into a hot topic on Wall Street.

Since Alphabet (GOOG) announced a major breakthrough with its new quantum chip named Willow, stocks in the quantum computing sector have experienced significant growth. Willow can dramatically decrease errors as it scales, and it managed to perform a benchmark computation in a mere five minutes, which is astonishing compared to the time it would take one of the fastest supercomputers today—10 septillion years.

This announcement led to a surge in Alphabet's stock price and had a pronounced effect on smaller quantum companies, such as D-Wave Quantum, Quantum Computing, Rigetti Computing, and IonQ, whose stock prices skyrocketed.

However, in January, these stocks faced a downturn following critical comments from several prominent tech leaders. For instance, NVIDIA’s CEO Jensen Huang stated that practical applications of quantum computing are still 15 to 30 years away. Shortly after, Meta Platforms' CEO Mark Zuckerberg echoed Huang's thoughts, suggesting that useful quantum computing is not imminent and that advanced AIs might emerge before quantum technology becomes practical. Even former Cisco CEO John Chambers expressed that quantum computing's full capabilities are still a long way off in what he described as the "AI decade."

Responding to these concerns, leaders of the quantum stock sector have come to the defense of their technology and companies.

Quantum Computing vs. AI: Which is the Better Investment?

It is crucial for investors to recognize that quantum computing is still an evolving field. Companies like Quantum Computing, D-Wave Quantum, and Rigetti Computing are currently lacking substantial revenue streams. IonQ, the largest player among these, has guided for a revenue range of only $38 million to $42 million in 2024, despite seeing its revenue double in the third quarter. With a market cap of $9 billion, IonQ's stock has a staggering price-to-sales ratio of over 200, indicating that investors are making big bets on the technology.

The debate around the potential of quantum stocks and the timeline for their disruption continues. When comparing quantum technology to AI, the latter appears to be a more deserving option for investment. AI technologies are already prevalent, expanding rapidly, and disrupting various industries. Additionally, AI stocks have more potential for growth. Below are two AI stocks that we believe are worth considering for investment.

1. Micron Technology

Micron Technology (MU) has gained popularity as a supplier of memory chips, particularly as demand for AI-related products rises across the board.

In its fiscal first quarter ending November, Micron's revenue surged by 84%, reaching $8.7 billion. The most noteworthy aspect was the remarkable growth in the data center segment, which saw revenue increase by over 400% year-over-year and 40% sequentially, thanks to robust demand for AI technologies. Micron has a strong partnership with NVIDIA, widely considered its largest customer, and its stock price recently rebounded after NVIDIA announced that it is utilizing Micron’s chips for its new Blackwell platform.

Currently, Micron presents itself as a promising opportunity for investors, especially since its stock price dropped following a recent earnings report due to weaker guidance. However, management expressed confidence in a return to strong growth, potentially leading to significant gains for the stock. With a forward P/E ratio of 14, the stock appears to be undervalued given its growth potential.

2. TSMC

Another AI stock that stands out as a necessary addition for 2025 is TSMC (TSM), the world's largest contract chip manufacturer.

TSMC produces chips for major companies like NVIDIA, Apple, and Broadcom, giving it considerable influence in the market with a share exceeding 50% in third-party chip manufacturing and about 90% in the advanced chip sector. It's a key player in the global economy.

In the fourth quarter, TSMC reaffirmed its leadership in advanced chips, with 74% of its revenue now derived from chips that are 7 nanometers or smaller.

During this quarter, TSMC reported a remarkable revenue growth of 38%, with its operating margin nearing 50%. Given the increasing demand for AI technology and a broader recovery in the chip market, TSMC is well-positioned for another excellent year in 2025 and beyond.

Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, also holds a position on the board. Jeremy Bowman has investments in Broadcom, Meta Platforms, Micron Technology, NVIDIA, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Apple, Cisco Systems, Meta Platforms, NVIDIA, and Taiwan Semiconductor Manufacturing, and also recommends Broadcom. For more details, refer to their disclosure policy.

Quantum, AI, Stocks