Alphabet Inc. (GOOGL), the parent company of Google, unveiled Willow, the company’s latest quantum chip, on Monday. This new chip solved a benchmark computation that would take a supercomputer 10 septillion years in under five minutes, and this quantum computing success opens new doors for the tech giant to grow. Although quantum computing is yet to scale sufficiently to be used commercially, Google’s success marks a significant breakthrough that is likely to pave the way for revolutionary changes in computing. I am bullish on Google as I believe the company is well-positioned to grow in the long term, aided by the commercialization of new technologies such as AI and quantum computing.
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Willow Represents a Major Breakthrough in Quantum Computing
My bullish stance on Google is strengthened by the company’s recent announcement, which highlights the extraordinary computing power of Willow. According to a blog post published by the founder of Google Quantum AI, Hartmut Neven, Willow solved a complex computational task in less than five minutes, whereas today’s supercomputers would take approximately 10 septillion years to do the same task. In addition, Willow has demonstrated the ability to reduce error rates significantly, which has been one of the key challenges facing the quantum computing sector. In a major boost to error correction, Willow allows for real-time recognition and correction of errors, which marks the beginning of a new era of quantum computing.
In addition to this, Willow’s performance on the random circuit sampling benchmark revealed that it has the ability to solve problems that are practically impossible for traditional computers that are in use today. This highlights how Willow’s computational power could be used in real-world applications to solve problems that were thought unsolvable previously. Another major breakthrough is Willow’s unique design, which allows for scaling up the number of qubits used in a computer while improving – or at least maintaining – the performance of the chip. This is key to designing quantum computers with real-world usability.
Google Has Several Options to Monetize Willow
I am encouraged by the monetization opportunities that open up for Google with the success of Willow. Google is likely to focus on offering Quantum Computing as a Service, or QCaaS, solutions through a cloud-native platform to generate substantial revenue in the long term. According to Quantum Insider, quantum computing vendors are expected to generate $50 billion in revenue by 2035, and QCaaS is expected to account for 40% of the quantum computing market. When commercial adoption of this technology increases, Google will be in a strong position to monetize Willow through a QCaaS model and capture a leading share of this market.
Google may also look for licensing deals where the Willow chip is sold directly to other tech companies and research institutes. According to Transparency Market Research, the demand for quantum processing units will grow at a stellar CAGR of 42% through 2031 to $13.1 billion from just $615 million in 2022. Google is well-positioned to benefit from this projected growth, with Willow emerging as a frontrunner in advancing the quantum computing space. Google may also consider offering professional services and consulting services to develop, implement, and optimize quantum algorithms across various use cases such as drug discovery, medical research, cryptography, and cybersecurity.
Willow Will Enhance Google’s Product Offering
Beyond being a standalone business unit that contributes to revenue growth, Google’s quantum computing division will improve the quality of its other products. As the company integrates quantum computing with Google Cloud, Google Search, and other AI applications, it will likely enhance the user experience. Integrating quantum computing with natural language processing can significantly strengthen Gemini’s appeal, potentially giving Google an edge over the market leader, ChatGPT.
Additionally, Google may leverage quantum computing to create more advanced products and expand into new markets, such as cybersecurity, cryptography, and data analysis.
Is Google a Good Buy Right Now?
Wall Street analysts praised Willow’s substantial computational power, suggesting this could be a watershed moment for the computing industry. BofA analysts noted that Willow’s progress highlights Google’s commitment to continued innovation, which is key for the market sentiment toward the company. Baird analyst Colin Sebastian, despite acknowledging that commercial adoption of quantum computing is years away, highlighted that Willow’s success reinforces Google’s technological leadership.
Google’s early inroads into quantum computing are likely to help the company emerge as a leader in a disruptive technological development similar to how Microsoft Corporation (MSFT) has emerged as the AI leader in the Western world thanks to its early investments in OpenAI. Based on the ratings of 10 Wall Street analysts, the average GOOGL price target is $209.21, which implies upside of 7.4% from the current market price.
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Google is currently valued at a forward P/E of 22, which suggests it is reasonably valued given that analysts expect the company to grow in double digits in the foreseeable future. Given that Google is still in the early stages of optimizing its advertisement business with AI, I believe there is a lot of room for improvement as it rolls out AI-powered ad campaigns and advanced creative tools to keep advertisers hooked, eventually leading to higher monetization levels. I also believe that Google’s quantum computing advancements are yet to be reflected in its market value.
Key Takeaway
Google’s Willow marks a pivotal moment in the computing industry as its capabilities suggest the development of a quantum computer may not take as long as initially predicted. Quantum computing advancements are likely to help Google open new doors to grow while improving the quality of its existing products. With Google continuing to innovate, I remain bullish on the prospects for the search engine giant.
