In 2022, GlobalData said the U.S. was about five years ahead of China in the quantum computing race. Now, in 2024, the firm considers the two countries as “nearly equal” in the arena.

Quantum computers use the properties of quantum physics for data storage and remarkably fast computation, GlobalData said in its latest quantum computing report. Even though the market may be small today, it is attracting sizeable investment from both the private and public sectors worldwide, it wrote.

Venture capital funding in quantum computing was $659 million in 2022 and jumped to $1.1 billion last year, according to GlobalData. The report also wrote that the market size is expected to grow to $10 billion between 2026 and 2030, representing a compound annual growth rate (CAGR) of between 30% and 50%.

Key countries and regions that are developing quantum strategies include the U.S., U.K., Canada, Israel, Australia, China, Japan and the E.U., according to the analysis firm.

The U.S. and China are leading players in this heated race. “China has made enormous strides in catching up with the U.S.,” GlobalData Principal Analyst Isabel Al-Dhahir said.

“In 2024, the two countries stand almost neck-and-neck, albeit with very different strategies. Private companies lead the way in the U.S., while in China, expertise is increasingly concentrated within state institutions,” she added.

US, China invest billions of dollars into quantum computing

The amount of investment pouring into quantum computing from both nations is fueling the rivalry.

Al-Dhahir told SDxCentral that the U.S. government has committed $3 billion in funding for quantum projects, with another $1.2 billion coming from the National Quantum Computing initiative.

The U.S. CHIPS and Science Act signed by President Joe Biden in 2022 “authorizes new investments in core quantum research programs.”

“Even more funding will likely come from so-called black budget projects at the Pentagon,” Al-Dhahir wrote in response to questions. “But the US’s key advantage is its access to tech giants such as Microsoft, IBM, Intel, and various start-ups, placing it as the current frontrunner in quantum computing.”

China, on the other hand, is not holding back with a commitment of at least $15 billion in quantum computing over the next five years, she added.

The country’s $10 billion National Quantum Lab at the University of Science and Technology of China is drawing in expertise from across the country.

“China’s strategy to pull together the entire country within an autocratic economic model is a long-term advantage over the U.S.,” Al-Dhahir said. “ While China is generally secretive about the exact nature of its research, its intermittent announcements demonstrate its strong position in quantum computing.”

She added China is also leading the quantum communication field through the Micius satellite project and the Beijing–Shanghai Quantum Secure Communication Backbone.

However, from the private sector, Chinese tech giants and leading quantum players Alibaba and Baidu have notably withdrawn from the market, GlobalData pointed out.

Alibaba last November announced the cut of its quantum computing laboratory and the team, donating both the lab and its equipment to Zhejiang University. Baidu made a similar announcement of donating its quantum computing laboratory and equipment to the Beijing Academy of Quantum Information Sciences (BAQIS).

Companies at the forefront of quantum computing

GlobalData notes in the report that leading public quantum computing companies include D-Wave, Fujitsu, IBM, Intel, IonQ, Microsoft and Honeywell (Quantinuum).

“The value of the quantum computing market is small today since commercial products are few. However, numerous players are investing in R&D [research and development]. These include big tech players but also notable smaller quantum computing companies such as IonQ, Rigetti, and D-Wave, all three of which have gone public,” Al-Dhahir said.

On the other hand, leading private quantum companies include Pasqal, PsiQuantum, Q-CTRL, Quantum Machines, Sandbox and Universal Quantum.

GlobalData’s report pointed out many quantum companies have no current path to profitability.

“Overcoming high error rates will be an important step toward profitability for quantum computing vendors,” Al-Dhahir said. “Suppressing error requires substantially far higher qubit counts than are being achieved today. While the first 1000+ qubit computer was unveiled in 2023, the consensus is that hundreds of thousands to millions of qubits are required for practical large-scale quantum computers.”

Is quantum winter looming?

Despite the excitement surrounding quantum computing developments, the industry faces its share of challenges. Many argue the “quantum winter” might be coming with the tightened flow of funding to start-ups.

“Quantum computing is vulnerable to a winter similar to that suffered during the development of AI [artificial intelligence],” Al-Dhahir said. “Headwinds facing the sector, slow progress to meet inflated expectations, and extremely long timelines for commercialization are contributing factors.”

But it’s a forward-looking market, she added. “Growth will be driven by realistic long-term progress expectations coupled with the belief that the technology has the potential to dramatically advance the power of computers.”

Meanwhile, the significant geopolitical importance of quantum computing, alongside the potential threats that powerful quantum computers present to existing cybersecurity frameworks, means that the U.S. and China, as well as the E.U. countries, the U.K., India, Canada, Japan and Australia, are making substantial investments toward building strong internal quantum ecosystems in the name of national security, Al-Dhahir said.