3 Companies Already Working on the Next Phase of Artificial Intelligence (AI)

3 Companies Already Working on the Next Phase of Artificial Intelligence (AI)

The field of artificial intelligence is still in its early stages, but several companies are already working on technology that could become the foundation of the future of AI. These companies are developing quantum computing systems capable of processing mountains of data in seconds, which would take decades for a conventional computer.

Quantum machines can run multiple calculations simultaneously, speeding up processing time, whereas classical computers must process data linearly. This means that quantum systems can scale AI beyond the capabilities of the most powerful supercomputers, allowing AI to drive cars and help find cures for diseases.

Three companies developing quantum computing technology have achieved impressive results. They are Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM)And IonQ (NYSE:IONQ). Here’s a look at how they’re creating technology that can drive the next phase of AI.

The many strengths of Microsoft

Microsoft may be known for its ubiquitous Windows computing system, but it has invested billions of dollars in artificial intelligence, including OpenAI, the company that helped launch the current wave of AI with ChatGPT.

Microsoft’s work in quantum computing allows it to power future AI systems. The company began building quantum machines in 2006 and is pioneering a new type of quantum bit, or qubit for short, that is similar to the bit in a conventional computer. Every quantum computer uses subatomic particles to perform calculations measured in qubits.

In April, Microsoft announced a breakthrough in its quantum computers by increasing error rates by 800 times. Since subatomic particles are very unstable, calculation errors are likely to occur.

The error rate achieved by the company represents the most reliable qubit ever recorded, according to Microsoft. This is a key step in producing quantum computers capable of achieving the next generation of AI.

Additionally, Microsoft’s financial strength gives it an advantage in this area. The company has built one of the largest cloud computing companies worldwide, helping Microsoft generate $61.9 billion in its fiscal third quarter ended March 31, a 17% year-over-year revenue increase.

This helped the company produce a strong fiscal third quarter. free movement of capital (FCF) of $21 billion, up 18% year-on-year. Microsoft can use its large FCF to fuel investments in quantum computing.

IBM’s Quantum Computing Successes

IBM’s work in AI dates back to the 1950s. Today, AI is the company’s focus. It therefore makes sense that it also invests in quantum systems.

In fact, IBM is considered one of the leaders in quantum computing. It was the first company to offer a quantum computer in the cloud in 2016. Since then, Big Blue has deployed more than 80 quantum systems.

For example, IBM partnered with the Cleveland Clinic to provide AI and implement a quantum computer touted as the first dedicated to healthcare research. And last December, IBM launched the first quantum computer with a 1,000-qubit processor.

Big Blue can fund quantum computing research through its robust FCF generation. This not only funds corporate investments, but also the company’s large dividends, which currently yield around 4%.

In the first quarter, the company produced $1.9 billion in FCF, up 43% from the prior year. IBM expects FCF 2024 to raise around $12 billion, ensuring that Big Blue can continue to fund its quantum computing work.

As an investment, IBM is more of an income stock than a fast-growing technology stock. Its first-quarter revenue of $14.5 billion represents just 1% year-over-year growth due to a slowdown in its consulting and infrastructure businesses.

However, its software division, which includes sales of AI and quantum computing, is doing well. This segment generated revenue of $5.9 billion in the first quarter, an increase of 5.5% compared to 2023.

The rapid growth of IonQ

Upstart IonQ, founded in 2015, is a newcomer. It’s also the only pure quantum computing company on this list, meaning its resources are entirely dedicated to this technology.

Despite its brief history, IonQ has gained an impressive list of customers. Customers understand Hyundaiwhich uses IonQ’s technology to build autonomous vehicles, and Oak Ridge National Laboratory, which will use IonQ’s quantum systems to improve the U.S. power grid.

This type of success helped the company reach $7.6 million in revenue in the first quarter, a 77% year-over-year increase. IonQ expects to reach at least another $7.6 million in the second quarter, up from $5.5 million in 2023.

The company reached its latest quantum technical milestone a year ahead of schedule, setting it up to reach a tipping point in 2025 where “classical computers will no longer be capable of fully simulating an IonQ system,” according to the company.

As IonQ, IBM, and Microsoft develop technologies to deliver the next phase of AI, now is the time to consider buying shares of these quantum computing giants.

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Robert Izquierdo holds positions at International Business Machines, IonQ and Microsoft. The Motley Fool holds positions at and recommends Microsoft. The Motley Fool recommends International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

3 companies already working on the next phase of artificial intelligence (AI) was originally published by The Motley Fool

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