The US Economy & Quantum Computing: Short-Term Headwinds, Long-Term Opportunities

Selling quantum computing proofs of concept is hard under good economic conditions. As the US (which is currently the largest market for quantum computing¹) stares down a potential recession in quarter three or four of this year, the job of business development (BD) professionals in our industry is going to get harder.

But all things will pass with time. And while there are short-term headwinds facing the US market, long-term opportunities are already emerging.

We’ll explore both of those areas, starting with what’s near-term.

Short-Term Headwind One: Layoffs

The US tech sector has been hard-hit by layoffs in recent months. As of late June, 794 tech companies, including major employers like Google and Amazon, went through layoffs².

The quantum computing industry can’t afford to ignore the impacts this will likely have on our industry. Because according to the New York Times, teams that are working on bleeding edge, non-revenue generating projects are the ones who are getting laid off first.

“The shifting economy and executive transitions away from founders have ushered in a new era, and employees wonder: Is their leader marching them to make their mark on the future, or right off a cliff?” – The Perils of Working on a C.E.O.’s Pet Project, New York Times³.

Image Credit: The New York Times

Getting laid off is a painful life event that’s linked to negative health outcomes⁴. In all likelihood, these lay-offs will have a chilling effect on the risk appetites of both the people who lead innovation efforts and those around them.

If you’re not sure if the company you’re targeting has been impacted by layoffs, check the Worker Adjustment and Retraining Notification (WARN) Tracker database⁵ to see if the company has reported that they’re going to layoff employees within the next two months or if they’ve already laid off employees. (Enacted in 1988, the WARN Act is a US, federal law⁶ mandating that businesses with more than 100 employees must notify the government 60 days before they’re going to have mass layoffs.)

Short-Term Headwind Two: Increased Interest in AI, which is Taking Resources Away from Quantum Computing

In a LinkedIn post from May⁷, Sergio Gago (Managing Director of AI/ML and Quantum at Moody’s Analytics) was one of the first people to call out how AI is getting increased attention compared to quantum computing.

In expanding on his LinkedIn post, Gago said:

“From our position in the financial industry we see how many corporates are switching their efforts to this new shiny toy, Generative AI. This is not a surprise since the vast majority of companies did not have relevant budgets for Quantum to start with as we found in our recent report, or they have not seen bottlenecks in their processes. Generative AI provides tangible results today so we see how innovation teams are pivoting towards that.

At the same time, the question arises whether Quantum can do anything with Generative AI. We believe the answer is NO. These two technologies are in two completely separate horizons, and while it is possible that in the far future they could complement each other, today they belong to different fields.”

Note: Gagos’ quote referred to the Moody’s Analytics report on “Quantum Computing in Financial Services: A Business Leader’s Guide,” which you can download here⁸.

In digging into the data, Gago’s right.

For instance, take a look at findings from Google Trends⁹ and IOT Analytics_¹⁰:

Here’s data from Google⁹ comparing interest in quantum computing vs. AI between April and June of this year.

Image Credit: Google Trends

Among the US population, interest in AI surged in April and, even though it’s cycled up and down since then, the interest in AI is far higher than quantum computing. From a business leader standpoint, right now it makes more sense to invest in less risky projects, which gives AI an edge over quantum computing.

And in looking at data from a C-Suite perspective, IOT Analytics found a similar theme. After analyzing roughly 5,800 earnings calls and 3,000 public companies in Q4 2022 and Q1 2023, IOT Analytics found that quantum computing isn’t being talked about by CEOs¹⁰.

Image Credit: IOT Analytics Research

Short-Term Headwind Three: The Likelihood of a Recession in 2023

The Federal Reserve sets economic policy for the US and they’re intentional about what they say and how they say it, because the language Fed officials use has an immediate impact on markets. And they’re aware of their impact – in fact, the Federal Reserve Bank of Kansas wrote a report about how communications from the Federal Open Markets Committee are analyzed with natural language processing¹¹.

With that in mind, ING looked at guidance from the Federal Reserve and their prediction is that, “recessionary forces are building rapidly, which will lead to rising unemployment and inflation falling quickly through late 2023 into 2024.”¹²

If a recession hits, it’ll have wide-reaching impacts and decrease the appetite for quantum computing proofs of concept because of their high costs. (As a note for quantum computing startup leaders, here’s a LinkedIn post with industry-specific guidance on how to weather a recession¹³.)

Shifting Gears

The short-term outlook is bumpy, yet at the same time, layoffs and increasing interest in AI could create opportunities for quantum in the long-run.

Long-Term Opportunity One: Talent is Getting Redistributed

In an article from April, the Wall Street Journal reported that laid-off workers from large companies are changing their priorities; instead of looking for jobs with prestigious, brand-name businesses, those workers are now finding jobs with small to medium-sized companies because they offer more stability¹⁴.

The redistribution of highly skilled workers in new areas will mean that, as demand for quantum computing eventually grows, there’ll be more companies who have the in-house talent needed to tackle a quantum computing proof of concept.

Image Credit: The Wall Street Journal

Long-Term Opportunity Two: AI Will Open Doors for Quantum

In the World Economic Forum’s most recent Future of Jobs Report, one of their top five key findings was: “Within technology adoption, big data, cloud computing and AI feature highly on the likelihood of adoption.”¹⁵

As companies build out new capabilities, like AI, they’ll lay the ground work (such as upskilling their workforce¹⁶ and navigating change management¹⁷) that they’ll need to one day take on a quantum computing proof of concept.

Image Credit: World Economic Forum

Long-Term Opportunity Three: Quantum-Inspired Algorithms

Powered by AI chips, quantum-inspired algorithms are gaining consumer interest because of how they deliver increased performance without needing to be run on a quantum computer.

In a recent article for Reuters, industry leaders from SandBoxAQ and QCWare commented on how they’re using quantum-inspired algorithms to tackle chemistry problems on classical computers. In doing this, they’re bridging the gap between the promise of scalable, fault-tolerant quantum computers and the performance that’s available today¹⁸.

Moving Through the Changing BD Landscape

Closing a deal in the quantum computing industry has never been easy. In the coming months, it’s likely going to get harder and finding deals to close will be like finding diamonds in the rough: it can be done, but an even more thoughtful approach will be needed to close sales opportunities.

As a parting thought, how can the health of the industry be measured?

From a BD standpoint, the best way to gauge how companies are responding is to look at their financials.

Take financial reporting from Quantinuum¹⁹, Rigetti^{20, 21}, and IonQ^{22, 23}, for instance. All three companies have publicly available financial information, as shown in the graph below where all the figures are in the millions.

Between 2021 and 2022, all three companies had steady or increasing revenues. With that baseline data in mind, the most successful companies will refine their go-forward strategies to optimize resources, while finding short-term, revenue opportunities to weather impending storms. When quarterly reports for Q3 and Q4 2023 and annual reports for 2023 come out, quantitative and qualitative analysis can be done to see how each company has navigated the uncertainty of 2023 and how they’re positioning themselves to take advantage of emerging opportunities in the years to come.

References

Zion Market Research. Quantum Computing Market Size, Share, Growth Report 2030. January 16, 2023. https://www.zionmarketresearch.com/report/quantum-computing-market
NerdWallet. Tech Layoffs Really Are Rising, and Here’s Why. June 23, 2023. https://www.nerdwallet.com/article/finance/tech-layoffs
The New York Times. The Perils of Working on a C.E.O.’s Pet Project. March 8, 2023. https://www.nytimes.com/2023/03/08/technology/tech-big-bets-layoffs.html?unlocked_article_code=LwQZ2kYmrOwCJ2QczDL_l0I-uegF_CKVbRBe43LpO3obV1LSniDgGH_iPzPogfkbokXtUmqXcfqdmiFT0eHlNoxjbmuT7zivSi0HPRV_CZ0b9Wi3nkr7c2HZdPuULxfovzQS2T2PwsHMU7pzBVatWeP6P8EmVzzgNkOY7o_6clKWQOpHozkEHApiJgQkHvW7OPP2l9fDzdp13HRdQ7yK-Epq1UyaXgFMI2MJSrKeQ5wrV4qOFFPs4ll-XTzHnr3i1pDjv82_DDGcLry2T-xVjG513uW_ltmfYGfCQLcU8H7KvQS_W1dY21uqKwai2-unzCctEf1W1miWW0f51TxUMF_a&smid=url-share
American Psychological Association. The Toll of Job Loss. October 1, 2020. https://www.apa.org/monitor/2020/10/toll-job-loss
WARN Tracker. Layoff Insights from Public Records. https://www.warntracker.com/
U.S. Department of Labor Employment and Training Administration Fact Sheet. The Worker Adjustment and Retraining Notification Act. March 6, 2019. https://www.doleta.gov/programs/factsht/WARN_Fact_sheet_updated_03.06.2019.pdf
LinkedIn. Sergio Gago’s LinkedIn post. May 2023. https://www.linkedin.com/posts/sergiogh_quantumcomputing-artificialintelligence-activity-7048259482149150721-LI6O?utm_source=share&utm_medium=member_desktop
Moody’s Analytics. Quantum Computing in Financial Services: A Business Leader’s Guide. 2023. https://www.moodys.com/web/en/us/about/what-we-do/quantum-computing/quantum-survey-report.html
Google Trends. https://trends.google.com/trends/explore?date=2023-04-01%202023-06-30&geo=US&q=%2Fm%2F069kd,%2Fm%2F0mkz&hl=en
IOT Analytics. What CEOs Talked About in Q1/2023: Economic Uncertainty, Layoffs, and the Rise of ChatGPT. April 5, 2023. https://iot-analytics.com/what-ceos-talked-about-in-q1-2023/
Kansas City Federal Reserve. How You Say It Matters: Text Analysis of FOMC Statements Using Natural Language Processing. https://www.kansascityfed.org/Economic%20Review/documents/7577/erv106n1dohkimyang.pdf
ING. Federal Reserve Preview: A Final Hike as US Recession Fears Mount. April 23, 2023. https://think.ing.com/articles/federal-reserve-preview-a-final-hike-as-us-recession-fears-mount#a8
LinkedIn. Danika Hannon’s LinkedIn post. November 2022. https://www.linkedin.com/posts/danikahannon_futurefocused-resilient-quantumcomputing-activity-6988111501815332864-SVDB?utm_source=share&utm_medium=member_desktop
The Wall Street Journal. As Tech Jobs Disappear, Silicon Valley Veterans Reset Their Careers: Laid-Off Workers from Companies Such as Meta and Amazon Choose Stability Over Status. https://www.wsj.com/articles/as-tech-jobs-disappear-silicon-valley-veterans-reset-their-careers-dbdb983?st=2hix38tl7slrzpt&reflink=desktopwebshare_permalink
World Economic Forum. Future of Jobs Report 2023. May 2023. https://www3.weforum.org/docs/WEF_Future_of_Jobs_2023.pdf
Quantum Strategy Institute. Quantum Machine Learning: A Roadmap for Technologists. February 28, 2022. https://quantumstrategyinstitute.com/2022/02/28/quantum-machine-learning-a-roadmap-for-technologists/
Quantum Strategy Institute. Becoming a Quantum Company: A Change Management Approach for Quantum Technologies & the Quantum Mindset. November 11, 2021. https://quantumstrategyinstitute.com/2021/11/11/becoming-a-quantum-company/
Reuters. Waiting for Quantum Computers to Arrive, Software Engineers Get Creative. April 17, 2023. https://www.reuters.com/technology/waiting-quantum-computers-arrive-software-engineers-get-creative-2023-04-17/
Honeywell. Q4 2022 Earnings Release. February 2, 2023. https://honeywell.gcs-web.com/static-files/efecdfab-e5a6-4702-b837-606f4a82788f
Rigetti. Rigetti Computing Announces Financial Results for Fiscal Year 2021; Delivers 48% Year-over-Year Revenue Growth and Further Accelerates Business Momentum Through Technology Leadership. March 10, 2022. https://investors.rigetti.com/news-releases/news-release-details/rigetti-computing-announces-financial-results-fiscal-year-2021#:~:text=Financial%20Results%20for%20the%20Fiscal,for%20the%20fiscal%20year%202020
Rigetti. Rigetti Computing Reports Fourth-Quarter and Full-Year 2022 Results. March 27, 2023. https://investors.rigetti.com/news-releases/news-release-details/rigetti-computing-reports-fourth-quarter-and-full-year-2022
IonQ. IonQ Announces Full Year 2021 Financial Results and Provides Business Update. March 28, 2022. https://investors.ionq.com/news/news-details/2022/IonQ-Announces-Full-Year-2021-Financial-Results-and-Provides-Business-Update/#:~:text=2021%20Financial%20Highlights&text=IonQ%20achieved%20revenue%20of%20%242.1,as%20of%20December%2031%2C%202021
IonQ. IonQ Announces Fourth Quarter and Full Year 2022 Financial Results and Provides Business Update. March 30, 2023. https://investors.ionq.com/news/news-details/2023/IonQ-Announces-Fourth-Quarter-and-Full-Year-2022-Financial-Results-and-Provides-Business-Update/default.aspx

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