Big Blue is making a quantum leap — for real.
International Business Machines (IBM) , which once held most of the world’s stored data on punch cards, has been making its presence felt in the world of quantum computing.
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Quantum computing, by the way, uses the principles of quantum mechanics to solve complex problems that would drive classical computers stark raving goofy.
And these mighty machines are mighty fast.
A human would have to perform one sum every second for c.50 quintillion years to equal what a quantum computer can do in a single second, according to a research note by Bank of America Securities.
“This could be the biggest revolution for humanity since discovering fire,” B of A said. “A technology that can perform endless complex calculations in zero-time, warp-speeding human knowledge and development.”
Theoretically, the firm said, “there is no calculation a quantum computer cannot do.”
IBM shares hit record high
Processing power, the backbone of technology, is led by the U.S., B of A said.
“Quantum, the first new platform technology for computers since digital technology, can level the tech playing field and reset everything,” the investment firm said.
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Whoever wins the quantum race will gain an unprecedented geopolitical, technological and economic advantage, the firm said.
“Government quantum funding announcements have totaled in the area of $42 billion, of which 35% has been made by China,” the firm said.
The IBM Q System One, introduced in 2019, was the world's first integrated universal quantum computing system designed for scientific and commercial use, BofA said. IBM Q System Two, the successor, was unveiled in 2023.
IBM said recently that it was joining with biotech and pharmaceutical giant Moderna (MRNA) to explore how algorithms could help create mRNA-based medicines.
“Understanding how proteins fold from a given nucleotide sequence is crucial for creating effective mRNA vaccines,” IBM said.
“This study is a powerful example of the progress the quantum community is making toward quantum advantage — the point at which quantum computers are shown to be more efficient, more accurate, or cheaper than classical computers for a particular task,” the company said.
The results of the latest study show an improvement over 2024, when IBM and Moderna first developed an approach to accelerate the creation of mRNA-based medicines.
In June, IBM shares hit a record high after the company unveiled a “feasible path” to build the world's first large-scale fault-tolerant quantum computer by 2030. That's one that can effectively suppress inevitable errors during quantum operations, which has been a problem with quantum computing.
Analyst sees software-driven quarter for IBM
During IBM’s first-quarter earnings call in April, CEO Arvind Krishna told analysts that IBM partnered with the Basque government to deploy Europe's first IBM Quantum System Two in Spain, “a milestone in global quantum leadership.”
IBM is scheduled to report second-quarter earnings on July 23. The company's stock is up 28% this year and has surged 50% from this time in 2024.
Related: Analysts revamp IBM stock price target after AI-fueled new high
Investment firms have issued research reports regarding IBM's earnings release, including RBC Capital, which raised its price target on Big Blue to $315 from $285 and affirmed an outperform rating on the shares.
Q2 will likely be driven by the software lines, with a focus on potential Red Hat reacceleration, generative-artificial-intelligence bookings, and staying on pace with free cash flow seasonality, the firm said, according to The Fly.
IBM’s $34 billion acquisition of software provider Red Hat, completed in 2019, was the largest in the company’s history and one of the biggest in U.S. tech.
Traction around generative AI and management of multiple agentic-AI operations should remain in focus as the company positions to enable enterprises to adopt AI, RBC added.
Stifel analyst David Grossman raised the investment firm's price target on IBM to $310 from $290 and maintained a buy rating.
While fundamentals are stable/positive, predicting upward earnings revisions in the current environment might be difficult, Grossman says. This creates incremental risk heading into the earnings report and might suggest that a post-Q2 report would provide a more opportunistic entry point for investors, Grossman said.
Morgan Stanley raised its price target on IBM to $253 from $233 while reiterating an equal-weight rating on the shares.
The firm said the market was already pricing in more than just free-cash-flow upside for IBM.
Given the expectation for more mixed software and consulting results this quarter, Morgan Stanley says the setup into Q2 earnings leans tactically cautious.
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