Palo Alto – September 12, 2025 – Woodside Capital Partners senior bankers Alain Bismuth, Andrew Bright, and George Jones write about Quantum Computing: The Next Frontier or the Next Bubble?
“Quantum computing has been 10 years away for the last 30 years.”
It’s a line industry insiders repeat with equal parts irony and exhaustion. Yet 2025 feels different. For the first time, the money, momentum, and breakthroughs suggest the quantum era may finally be tipping from theory to industry. McKinsey’s Quantum Technology Monitor 2025 projects that the total quantum-technology market could approach $100 billion by 2035 and approximately $200 billion by 2040. Yole Group predicts that the total quantum hardware market will grow from $954 million in 2024 to $17.4 billion by 2035. Japan has even labeled 2025 the “first year of quantum industrialization,” and China’s public spending commitments exceed $15B, underscoring the geopolitical stakes around secure communications, advanced materials, and the next generation of AI.
The State of the Industry: From Curiosity to Industrialization
Quantum technology now rests on three pillars:
• Quantum computing: the headline act
• Quantum communication: secure transfer of information at scale
• Quantum sensing: ultra-precise measurement for navigation, healthcare, and defense
McKinsey estimates that these pillars combined could reach about $97 billion by 2035 and approximately $198 billion by 2040. The momentum is evident in concrete data: startup investments grew around 50% year-over-year to $2.0 billion in 2024, and revenues for quantum computing companies are estimated at $650–$750 million in 2024, with projections to exceed $1 billion in 2025. Japan’s public commitments, totaling around $7.4 billion announced in early 2025, highlight how national programs are reshaping the landscape.
Hybrid computing is becoming the operating model.
IBM and AMD’s new alliance to develop “quantum-centric supercomputing” exemplifies the practical path forward: treat the QPU as a specialized accelerator – similar to how GPUs have risen for AI – closely integrated with established HPC. As IBM CEO Arvind Krishna stated, “Quantum computing will simulate the natural world and present information in an entirely new way.” The partners will investigate real-time error correction using AMD technology and leverage IBM’s Qiskit stack, with AMD EPYC CPUs and Instinct GPUs (Frontier, El Capitan) on the classical side.
No single qubit wins (yet).
Yole’s and WCP’s research suggests multiple modalities will coexist for years, each with distinct advantages and disadvantages:
1) Superconducting Qubits: Based on electrical circuits that carry current with zero resistance.
- Key Advantages: Most mature, they can achieve high gate speeds, which means they can run complex quantum algorithms in a timely manner
- Key Disadvantages: Very low temperature requirements (<20 milli-kelvins) & high sensitivity to electromagnetic radiation, both increase operational cost & complexity
- Key Players*: Alice & Bob, Atlantic Quantum, Google, HPE, IBM, Nord Quantique, Rigetti Computing
2) Photon Qubits: Use light particles & properties such as light polarization & phase to carry quantum information.
- Key Advantages: Can operate at room temperature, good for quantum communication due to their ability to travel long distances, scalable since photonic qubits can be generated on chips
- Key Disadvantages: Controlling and manipulating individual photons is challenging
- Key Players*: Psi Quantum, Xanadu
3) Trapped Ion Qubits: Use individual charged atoms that are trapped in electromagnetic fields. Quantum information is stored in the internal electron states of the atom, these states are manipulated using pulsed lasers
- Key Advantages: Highly accurate when performing quantum computer operations, the quantum information they carry is also stable over long periods of time (long coherence)
- Key Disadvantages: As each ion needs to be individually controlled with lasers, scalability is considered the biggest challenge
- Key Players*: Honeywell, IonQ, Oxford Ionics, Quantinuum
4) Neutral Atom Qubits: Use individual neutral atoms, trapped in a laser light lattice. Again, quantum information is stored in the internal electron states of the atom and these states are manipulated using pulsed lasers. Also known as Cold Atom Qubits.
- Key Advantages: Laser lattice trapping is more scalable than trapping in electromagnetic fields. Again, the quantum information they carry is stable over long periods of time (long coherence)
- Key Disadvantages: The manipulation of large lattices of trapped atoms remains, a significant challenge. Computation speeds are slow relative to other qubit types
- Key Players*: Atom Computing, Infleqtion, QuEra
5) Spin Qubits: Typically made from semiconductor materials (often Silicon), they use the spin states of electrons or nuclei to encode quantum information. Spin Qubits are typically implemented in 2 main architectures; 1) Donor Spin qubits, where a donor atom (e.g. phosphorous) replaces a silicon atom and 2) Quantum Dot qubits (see 6 below)
- Key Advantages: Can be created using the same techniques used to make classical semiconductors, thereby manufacturing Spin Qubits is inherently scalable
- Key Disadvantages: Subject to interference from external magnetic fields. Whilst it is (relatively) easy to manufacture lots of Qubits, precise control of individual Qubits remains challenging
- Key Players*: Intel, Photonic Inc., Silicon Quantum Computing
6) Quantum Dot Qubits: Use 3-dimensional nanoscale semiconductor structures to confine electrons. Quantum information is stored either in the electron’s charge or the electron’s spin (as per Spin Qubits).
- Key Advantages: Again, they can be created using classical semiconductors fabrication techniques thereby making Quantum Dot Qubits inherently scalable. They are therefore also relatively easy to integrate with classical electronics
- Key Disadvantages: Individual quantum dots require very precise control. Stored quantum information can be unstable over time (short coherence)
- Key Players*: Diraq, Intel, Quantum Motion
7) Diamond Nitrogen-Vacancy (NV) Center Qubits: Use defects in diamond crystals, wherein two neighboring carbon atoms are removed. One is replaced by a nitrogen atom, and the second space is left vacant. Hence the name Nitrogen-Vacancy. Quantum information is stored by the Nitrogen atom via microwave and optical manipulation.
- Key Advantages: Can operate at room temperature, and are ideal for sensing magnetic fields, photons and other sub-atomic particles
- Key Disadvantages: It is difficult to manipulate and control large number of NV Center Qubits. Accuracy is not as high as other qubit types (low fidelity)
- Key Players: Quantum Brilliance, Qubits OS
8) Topological Qubits: Unlike other qubits, information isn’t stored in individual particles, rather it is distributed in the topology (the shape of the structure), in 2—dimensional quasi-particles known as anyons.
- Key Advantages: Topological Qubits are inherently less error prone, because stored information is distributed, fewer errors mean less error correction and thus improved scalability
- Key Disadvantages: The anyons must be manipulated very precisely using superconducting materials and magnetic fields
- Key Players: Microsoft, Nokia Bell Labs
*All underlined companies have been selected for Stage A of Darpa’s Quantum Benchmarking Initiative, see next section.
DARPA’s Quantum Benchmarking Initiative
It would be amiss to write an article on the status and future of quantum computing without mentioning DARPA’s Quantum Benchmarking Initiative (QBI). Announced in 2023 and kicked off in July 2024, it aims to speed up the development of useful quantum computers. QBI is a 3-stage program to rigorously validate whether any quantum computing approach can build a utility-scale computer that generates computational value beyond its cost. The 3 stages are:
- Stage A: A 6-month sprint to provide technical details of a utility-scale quantum computer concept that has a plausible path to realization by the year 2033
- Stage B: A 12-month project to develop a comprehensive R&D strategy, a mitigation plan for key identified risks, and prototypes for validation in Stage C
- Stage C: An independent verification & validation team will conduct rigorous testing and evaluation of hardware components and algorithms
In April 2025, 16 companies were announced to have qualified for Stage A of the QBI. They each received up to $1M in funding. It is worth noting that the QBI is not a competition; all companies that successfully demonstrate the required level of viability will proceed to Stage B. Expect an announcement regarding which companies will proceed to Stage B in late 2025 (watch this space). The 16 companies represent 6 of the qubit types described in the previous section.
Applications: What Quantum Can (and Can’t) Do Today
What’s moving now (pilot scale):
- Optimization in logistics and finance
- Simulation of small molecules in pharma/chemistry
- Hybrid HPC + quantum for targeted problems; precisely the model IBM/AMD are pushing
Where the real payoff lies (next wave):
- Drug discovery & materials: simulating molecules for new medicines, fertilizers, or batteries
- AI acceleration: quantum hardware could dramatically cut training time for foundation models
- Climate modeling: better catalysts, superconductors, carbon capture
- Cryptography: both the threat (breaking RSA) and the solution (new quantum-safe encryption)
Quantum Communications: The First Real Market?
While computing grabs headlines, communications is commercializing first. McKinsey estimates the quantum communication market at ~$1.2B in 2024, growing to $10.5–$14.9B by 2035 (22–25% CAGR). With governments accounting for ~57% of purchases in 2024, and telecoms expected to rise, the market is projected to expand significantly. Europe’s EuroQCI program and Japan’s long-running Tokyo QKD Network show how deployment is unfolding in practice.
For investors, communications offers shorter-term revenue and likely earlier M&A, especially in QKD, quantum-safe cryptography, and early network gear.
Barriers: The Hard Problems Ahead
- Error correction: Getting to 1,000+ fault-tolerant logical qubits remains the central challenge
- Infrastructure: Cryogenics, lasers, and specialized equipment remain expensive; skilled talent is in short supply
- ROI realism: Beyond pharma pilots and government contracts, many customers are in test and learn mode
- Hype risk: Overpromising could trigger a funding pullback; discipline is critical when making “quantum advantage” claims
The Players: Big Tech, Startups, and Nations
Big Tech
- IBM: superconducting roadmap; hybrid cloud + quantum centric supercomputing push with AMD
- Google: high-profile progress on control and error correction (e.g., Willow milestones)
- Microsoft: Azure Quantum ecosystem and tooling
Pure plays
- IonQ: trapped ion systems, public markets
- Quantinuum: full-stack leader; $600M raise (Sept ’25) at a $10B valuation underscores investor appetite
- PsiQuantum: large bet on photonics
National champions & regional momentum
- Japan: designated 2025 as the “first year of quantum industrialization”; RIKEN is co-locating IBM’s System Two with Fugaku and operating Reimei (trapped-ion) on-prem for hybrid research
- China: significant, state-led spending; cumulative over $15 billion in public investment cited by multiple analyses
- Europe: photonics and superconducting momentum. QuiX Quantum aims for a universal photonic system (“photonic quantum computers are very insensitive to noise and work at room temperature,” CEO Stefan Hengesbach told EE Times Europe), while IQM’s $320M funding round (total funding $600M) emphasizes scaling ambitions
11 Promising Start-ups to Watch
- AUREA Technology (France): A leader in terrestrial & satellite-based quantum secure communications. Aurea produces the essential building blocks for Quantum Key Distribution (QKD), these devices use single-photons, quantum superposition and photon entanglement to deliver theoretically unbreakable encryption
- Diraq (Australia): Uses almost-standard CMOS chip mass manufacturing process at existing high-volume semiconductor foundries to put millions and later billions of quantum dot qubits onto a single chip. The small chip size and the fact that that operates at 1 Kelvin reduces the cost and complexity of cooling by several orders of magnitude. In June 2025 Diraq integrated its processors with the NVIDIA DGX Quantum platform and Quantum Machines controls stack. The collaboration demonstrates the use of classical accelerators to perform real-time quantum control tasks
- Ideon (Canada): Develop of ruggedized quantum sensors, that are placed deep underground. They detect muons, sub-atomic particles that arrive from outer space. They use data from these muons and proprietary software to create detailed 3-dimensional density maps of the geological features above the sensor. Ideon massively reduces the time and cost associated with drilling-based geological surveys
- Kiutra (Germany): A leader in Adiabatic Demagnetization Refrigeration (ADR) technology & solutions. Their devices allow quantum researchers & developers to achieve milli-kelvin temperatures without the complication, cost & time required for gas-based cryogenic cooling
- Pasqal (France): A full-stack quantum computing company, founded by Nobel laureate Professor Alain Aspect and other quantum physics experts. Their technology uses lasers to trap and manipulate neutral atoms as qubits. Their ‘Pulser’ software tool allows users to design and simulate quantum algorithms
- Phasecraft (UK): Develops high-efficiency quantum algorithms & software designed for today’s noisy, error prone quantum computers. These drastically reduce the number of quantum operations – and therefore qubits – required to create useful & affordable quantum computers
- Quandela (France): A leading specialist in full-stack photon qubit quantum computing. Their quantum computers are designed to be modular, interconnected and scalable, to support prototyping, testing, and the development of quantum algorithms. Perceval is Quandela’s open-source quantum programming framework that bridges the gap between theoretical algorithms and practical implementation on photon qubit hardware
- Quantum Machines (US): Specializes in hardware and software that sends signals to command quantum processors. It is estimated that 50% of companies developing quantum computers are already customers of Quantum Machines
- QuEra (US): Spun out of Harvard and MIT’s Quantum labs, QuEra is focused on commercializing Neutral Atom qubit computers. QuEra today operates the world’s largest (256 qubit) publicly accessible computer available over a major public cloud (AWS)
- QuiX Quantum (Netherlands): A developer of a photon qubit quantum computer built from integrated Silicon Nitride photonic chips that operate at room temperature. They are aiming to deliver a first-generation quantum computer capable of running a broad range of algorithms as early as 2026
- Riverlane (UK): Enabling fault-tolerant quantum computing via their leadership in Quantum-Error Correction software which works with a wide variety of qubit types and help turn error-prone physical qubits into reliable logical qubits
These firms are also prime targets for M&A by Big Tech and defense companies.
Outlook: The Coming Shakeout
The next five years will separate contenders from hype. Expect:
- Consolidation to occur as weaker startups fold or get acquired
- Communications and hybrid HPC to deliver the first commercial wins
- National programs to continue to treat quantum as strategic infrastructure
Quantum is no longer a decade away. It’s here, though distribution is uneven, and for investors with patience and a sharp eye for engineering reality, now is the time to place targeted bets. So, returning to our earlier question…
Quantum: The Next Frontier or the Next Bubble?
To quote Jean Christophe Eloy from Yole Group: “perhaps both, as we exist in quantum superposed states.”
Woodside Capital Partners is a leading corporate finance advisory firms for tech companies in M&A and financings in the $30M –$500M enterprise value segment. The firm has worked with extraordinary entrepreneurs and investors since 2001, providing ultra-personalized service to its clients. Our team has global vision and reach, and has completed hundreds of successful engagements. We have deep industry knowledge and extensive domain and transaction experience in these and other sectors: Artificial Intelligence, CyberSecurity, HR Tech, Digital Advertising and Marketing, Autonomous Vehicles, ADAS, Computer Vision, Aerospace and Defense, CloudTech, Enterprise Software, IT Services, Information Security, HealthTech, MedTech, FinTech Internet of Things, Networking / Infrastructure, Robotics, Semiconductors, Quantum and Energy Storage. Woodside Capital Partners is a specialist in cross-border transactions, and has extensive relationships among venture capitalists, private equity investors, and corporate executives from Global 1000 companies. More about Woodside Capital Partners here.
Questions? Contact Alain Bismuth, Managing Director, Woodside Capital Partners at alain.bismuth@woodsidecap.com.