Dive Brief:

• By 2035 quantum technology may generate as much as $2 trillion in value for businesses focused on finance, chemicals, life sciences and mobility, McKinsey said in a report.
• As officials recognized the potential commercial and strategic benefits, spending on quantum technology by the U.S. and other governments last year rose more than 50%, totaling nearly one-third of long-term investment in such innovation, according to McKinsey. Investors in quantum technologies have largely focused on the U.S., which has netted more than twice the funding of the U.K, the No. 2 investment target. 
• Venture capital firms primarily focused on established start-ups, channeling 75% of total investment value in series B funding rounds, McKinsey said. “This suggests the establishment of more-mature technological platforms for quantum computing and signals investors’ potential risk aversion to early-stage start-ups and unproven technologies or approaches.”

Dive Insight:

The U.S. government in recent years has stepped up investment in quantum technologies, more than doubling research and development spending to $932 million in fiscal year 2023 from $449 million in fiscal year 2019.

Quantum information science “could have profound positive impacts on society,” and with “several commercial activities underway now, the world is on the cusp of a second quantum revolution,” the National Science and Technology Council said in a December 2023 report.

The new computers can be “vastly superior to that of traditional, classical technologies,” the council said.

McKinsey agrees. “Classical computers are relatively straightforward,” according to McKinsey. “They work with a limited set of inputs and use an algorithm and spit out an answer.”

In contrast, quantum computers simultaneously make many different calculations, completing a task much faster than older technology, McKinsey said. “But that’s not the end of the story: Quantum computers don’t deliver just one clear answer like classical computers do — rather, they deliver a range of possible answers.”

Despite the advantages of quantum computing, private and corporate funding last year in new companies in the field fell 27% to $1.71 billion from $2.35 billion in 2022. “Quantum sensing” start-ups faced the biggest setback.

A shift in focus to generative artificial intelligence and “lingering perceptions of QT being a long-term technology” that is not well understood eroded funding for quantum computing, McKinsey said in its report titled, “Steady Progress in Approaching the Quantum Advantage.”

Deal sizes also fell, with the average deal at $40 million last year compared to $105 million in 2022, according to McKinsey. The number of deals during the same period shrank to 171 from 206.

Public funding for quantum computing surged, McKinsey said, noting that “a range of countries — led by Germany, the U.K. and South Korea — have announced significant new funding for QT development, bringing the global public funding total to date to about $42 billion.”

Also, companies last year filed more patents than in 2022 and offered a range of improved capabilities, including providing quantum computing through the cloud and advances in reducing and correcting errors, McKinsey said. The number of universities offering degrees in the field, and the number of graduates with quantum expertise, also rose.

“Building off of this talent and these investments to generate value is still a challenge because of limited access to state-of-the-art hardware and infrastructure, limited awareness and adoption of quantum technologies and a lack of interdisciplinary coordination (such as between academia and industry) required to bring technologies to market,” McKinsey said.