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Investing.com -- Morgan Stanley said in a note Tuesday that it now sees a larger potential market for quantum computing following IBM’s recent investor event, but cautioned that commercialization remains years away and fraught with uncertainty.
“We walk away from last week’s investor event with a better appreciation for IBM’s quantum leadership,” analyst Erik Woodring wrote, adding that it now believes the quantum total addressable market “could someday surpass the $50 billion high-performance computing market.”
Woodring commented that the event, held at IBM’s Thomas J. Watson Research Center, showcased “the leadership that IBM has in Quantum, the competitive moats that IBM could benefit from, and a better understanding of the technological progress and challenges that remain ahead.”
Morgan Stanley highlighted comments from IBM executives, including Jay Gambetta, Jerry Chow, and CFO Jim Kavanaugh, who outlined progress toward proving quantum advantage and developing fault-tolerant quantum systems.
However, the bank feels “commercialization, and thus time to market, the TAM/industry fundamentals, and unit economics, are still extremely hard to predict.”
Woodring believes “quantum advantage has yet to be proven, an error-corrected quantum system is still 3+ years away, and the use cases/commercialization aren’t readily apparent to us yet.”
The analyst maintained a $252 price target on IBM, saying quantum computing remains part of their $440 bull case valuation.
That scenario assumes IBM captures “20% market share of a $50 billion TAM in 15 years, discounted back to today and capitalized at a peer EV/Sales multiple.”
“Quantum has the potential to become a powerful technology and incremental growth driver for IBM,” Morgan Stanley stated, “but it only remains part of our bull case valuation.”