Key Points
- An official with the U.S. Department of Commerce reported last week that the Trump administration was considering equity stakes in quantum computing companies.
- This follows equity stake announcements with Intel and Lithium Americas, both of which have sent their respective shares higher.
- Quantum computing stocks rallied on the news, which may be laying the tracks for a sustained run. One ETF provides broad exposure for the long road ahead.
This year, the market's seen its fair share of so-called Trump trades. Over the past quarter specifically, the president has announced that the government will be taking equity stakes in at least three publicly traded companies. As a result, those deals have sent their respective stocks skyrocketing.
Last week, after rumors that the administration was considering another, it's evident that investors should expect these deals—the aim of which is to shore up domestic supply chains as a matter of national security—to continue.
The next target the president may have his sights set on? Quantum computing.
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The Trump Administration's Evolving Track Record of Equity Stakes
One of the first companies to benefit from President Trump's interest in taking equity stakes was MP Materials (NYSE: MP). As a vertically-integrated producer of rare Earth elements (REEs), MP Materials owns and manages Mountain Pass Rare Earth Mine and Processing Facility in California—the only commercially viable REE site in the United States.
On July 10, the company signed a deal with the government which took a 15% stake in MP Materials in exchange for the U.S. Department of Defense investing $400 million in preferred stock, making it MP Materials' largest shareholder. Since then, the stock is up nearly 136%.
Next, in August, the administration took a 10% equity stake in legacy digital technology firm Intel Corporation (NASDAQ: INTC). That deal was valued at $8.9 billion upon its announcement. Since Aug. 1, shares of the formerly struggling INTC are up more than 98%.
Then in late September, the administration announced that it was taking a 5% equity stake in pre-revenue Lithium Americas (NYSE: LAC)—a Vancouver-based mining company—and another 5% equity stake in the Thacker Pass venture that it jointly owns alongside General Motors (NYSE: GM).
The Thacker Pass project represents the largest lithium reserves in the United States, one of the largest in the world and its stockpile is expected to satisfy 25% of global demand for the metal, which is essential to the ongoing EV revolution.
The mine isn't expected to be fully operational until 2027. Nonetheless, in the wake of that announcement, shares of LAC—a company that posted -$43 million in net income last year to go along with $100 million in total liabilities—surged more than 227% from Sept. 23 to Oct. 14.
Is Quantum Computing Trump's Newest Equity Target?
After announcing deals with MP Materials, Intel, and Lithium Americas in less than three months, the administration is signaling that it's willing to invest significant capital to ensure the sustained success of what it views as mission-critical organizations.
Last Thursday, the Wall Street Journal reported that, according to a source in the Department of Commerce, the administration was considering several new equity deals, this time with a handful of quantum computing companies.
A rally ensued, specifically with the stocks of Quantum Computing (NASDAQ: QUBT), IonQ (NYSE: IONQ), Rigetti Computing (NASDAQ: RGTI), and D-Wave (NYSE: QBTS), all of which were named as companies engaged in discussions with the White House.
Shares of those four firms gapped up at Thursday's open, gaining 8.08%, 9.47%, 11.34%, 23.31%, and 8.08%, respectively, since. However, by Thursday afternoon, the Trump administration tamped down expectations, telling CNBC that it was not "currently" in negotiations with quantum computing companies.
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A Boon for an Industry That Is Still in Its Infancy
Despite the administration's claim that it wasn't presently engaged in negotiations with quantum firms, that market corner continued rallying through Friday's close.
However, like the Lithium Americas deal, any prospective deal with the aforementioned quantum computing companies would still take years to bear fruit. According to McKinsey & Co., "surging investment and faster-than-expected innovation could propel the quantum market to $100 billion in a decade."
But a decade is a long time to wait for any single speculative stock to take the next step forward. Despite Big Tech's best efforts to accelerate practical applications, only small-scale quantum computers currently exist, and their uses are limited to prototypes and hands-on experimentation with quantum principles.
Instead, patient buy-and-hold investors can gain exposure with the world's largest quantum-themed ETF: the Defiance Quantum ETF (NASDAQ: QTUM). With $2.95 billion in net assets, the fund's 0.40% expense ratio is offset by a dividend yielding 0.66%, or 73 cents per share annually.
Among QTUM's top holdings are:
Last week's rally sent the ETF nearly 5% higher. Over the past 12 months, institutional investors have poured $38.66 million into QTUM while the fund has only seen $2.69 million in outflows. Current short interest is just 1.92%.
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