Is IBM Stock a Buy on Its Quantum Breakthrough?

Key Points

• IBM and HSBC launched the world's first quantum-enabled algorithmic trading system in September, moving quantum computing from lab experiments to live financial markets.

• IBM has booked over $1 billion in cumulative quantum business since 2017, while maintaining profitable operations and a high dividend yield.

• Unlike pure plays trading at hundreds of times sales, IBM offers quantum exposure through a diversified business generating $13.5 billion in annual free cash flow.

• 10 stocks we like better than International Business Machines ›

Quantum computing could revolutionize everything from drug discovery to finance, with the global market expected to reach $7.3 billion by 2030. Most headlines focus on pure plays like IonQ, Rigetti Computing, and D-Wave Quantum -- companies generating attention but little revenue, with stock prices swinging wildly on every technical update.

Meanwhile, International Business Machines (NYSE: IBM) has pursued a steadier path. Since 2017, the tech giant has booked over $1 billion in cumulative quantum business and built the world's largest cloud-based quantum network. This month, IBM delivered its boldest proof point yet: partnering with HSBC Holdings (NYSE: HSBC) to launch the world's first quantum-enabled algorithmic trading system.

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Here's why this tech giant is easily the best play on the quantum computing theme.

Image source: Getty Images.

IBM's quantum campaign

IBM has laid out one of the most aggressive quantum road maps in the industry. Its plan targets quantum advantage by 2026 and full fault tolerance by 2029, with Starling -- its next-generation system -- expected to run 100 million gates on 200 logical qubits. The system will be built in Poughkeepsie, New York, using modular architecture, with interim systems (Loon, Kookaburra, Cockatoo) bridging toward fault tolerance.

IBM's Quantum Network spans nearly 300 organizations with over 600,000 users accessing its cloud services. In April, IBM announced a $150 billion U.S. investment plan over five years, including more than $30 billion for quantum and mainframe research and development. That scale gives the company the advantage of backing its quantum vision without the dilution risk plaguing pure-play start-ups.

Breaking new ground

The new HSBC collaboration marked a watershed moment: the first-known quantum-enabled algorithmic trading system. For the first time, IBM's quantum technology was applied in live financial-market conditions, moving beyond theoretical promise into enterprise-grade use.

The importance is clear. IBM isn't just building advanced machines -- it's securing real deployments with blue chip clients. While pure-play rivals are still proving they can move past lab prototypes, IBM has demonstrated tangible business adoption.

That credibility, combined with unmatched scale, gives IBM a distinct edge in monetizing quantum as the market matures. The HSBC project proves what investors need to know: Enterprises will pay for quantum solutions today, not just someday.

The pure-play moonshots

Smaller quantum names illustrate the riskier side of the sector. IonQ commands an $18 billion valuation on annual revenue measured in tens of millions. Rigetti runs its 84-qubit Ankaa-3 system with world-class fidelity benchmarks, but trades at more than 900 times trailing sales. D-Wave pursues quantum annealing for optimization problems with a triple-digit sales multiple.

All three remain years from profitability, with no fallback businesses to cushion any missteps. If technical progress slows or a rival's architecture leapfrogs ahead, shares could collapse overnight. Pure plays offer maximum upside if quantum takes off -- but maximum downside if it doesn't.

The stability premium

IBM offers what moonshots cannot: diversification, resources, and patience. Its hybrid cloud and artificial intelligence (AI) businesses generate steady cash flow. In the second quarter, IBM recorded $17 billion in revenue and raised full-year 2025 free cash flow guidance above $13.5 billion.

As a bonus, IBM shares now yield about 2.4%, with dividends supported by recurring revenue. Even if fault-tolerant quantum slips past 2029, shareholders still own a profitable, dividend-paying enterprise software leader with AI and hybrid cloud exposure.

Quantum without the gamble

IBM isn't a moonshot bet on quantum computing -- it's a profitable enterprise layering quantum optionality onto a diversified business. The HSBC milestone proves that enterprises will pay for real deployments years before most pure plays generate meaningful revenue. Trading at about 4 times sales, IBM stock offers the most rational way to invest in quantum's promise.

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HSBC Holdings is an advertising partner of Motley Fool Money. George Budwell has positions in D-Wave Quantum, HSBC Holdings, IonQ, and Rigetti Computing. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool recommends HSBC Holdings. The Motley Fool has a disclosure policy.