Too many quantum startups, too little money to keep them alive

Gartner predicts more than half will fold by 2030, even as businesses begin testing the technology's usefulness

More than half of quantum computing startups will be out of business by 2030, Gartner predicts, as an overcrowded market struggles to generate enough commercial revenue.

The analyst expects customers to reject technologies that fail to achieve fault-tolerant quantum computing – reliable computation despite errors in the underlying hardware.

Despite that forecast, Gartner says enterprises are making initial investments as quantum technologies begin to show early signs of practical business advantage.

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Broad commercial usefulness remains elusive, but organizations are building expertise rather than waiting for the technology to mature.

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"CIOs and IT leaders should treat their quantum journey as a multi-year endeavor with the aim of gaining a competitive business advantage over their closest competitors," says Gaurav Gupta, Gartner VP analyst and chief of research for its emerging market dynamics team.

Estimates put the number of quantum startups at between 200 and 300, competing in a market Gartner forecasts will generate $1.1 billion in worldwide revenue in 2027. That is a tiny fraction of the quarterly revenue of companies such as Samsung and Nvidia, but still up on the $869.9 million forecast for this year.

As The Register reported a couple of years back, developing useful quantum computers requires sustained funding, and while big players like IBM or Google have no shortage of revenue streams, startups may be subsisting on seed funding that will eventually run out if they can't persuade investors that they are onto something.

The quantum industry therefore still faces numerous challenges, but continues to make steady progress, not just in the number of quantum bits (qubits) in a system, but in algorithm development, gate speeds, and reliability.

And breakthroughs are happening more rapidly than initially expected, at least according to Gartner.

"The early quantum advantage era has arrived because noisy intermediate-scale quantum processors now have enough qubits to do limited complex tasks with improved error reduction," claims Gupta.

The firm identifies the public sector and the financial industry as the two markets likely to spend the most on quantum computing initiatives.

Of these, the public sector is forecast to lead at first, driven by a strong desire for nations to gain technical leadership. Total spend here in 2027 is expected to amount to $245 million, up from $219 million this year.

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Banking, finance, and insurance firms are expected to overtake the public sector in 2028, spending $289 million against its $280 million. Gartner forecasts that they will remain the largest customer sector through 2030.

The US Department of Energy recently kicked off an initiative that will see up to ten participants compete to deliver a fault-tolerant, scientifically relevant quantum computer by 2028, an ambitious goal that is almost certain to fail given the modest amount of funding it is offering. ®