Top 9 investment trends to watch in 2022 Part 4

Today we continue with our top trends for 2022 as part of our ongoing series, “Our Top Nine Investing Trends to Watch in 2022”

In this series, we’ll cover our top 9 investment ideas:

1. The Great Lithium Disconnect
2. Decarbonization — green switch on
3. The future of payments
4. Quantum Computing and Moore’s Law on Steroids
5. Connected devices and memory
6. Decentralized finance—an “Amazon in 1994” moment
7. Influential “I’s”
8. Watch out for gold
9. Equities – Watch out for high valuations

If you want to download all 9 trends in one document to read at your leisure, just enter your email below and have it delivered straight to your inbox.

And this time we’re talking about…

Trend #4 Quantum Computing and Moore’s Law on Steroids

In less than a decade, quantum computers will begin to outperform ordinary computers, driving breakthroughs in artificial intelligence, the discovery of new pharmaceuticals, and beyond. The very fast computing power offered by quantum computers has the potential to disrupt traditional businesses and challenge our cybersecurity. Businesses must be ready for a quantum future, because it is coming.

– Jeremy O’Brien, 2016

Let’s talk about quantum computing by tackling a roundabout puzzle.

You’re hosting a Christmas dinner and have to seat 10 picky parents. A single optimal seating arrangement works among all possible permutations.

How many combinations must be sifted through to arrive at the optimal arrangement?

Answer: more than 3.6 million.

Over 3.6 million combinations to calculate just to seat 10 family members around a Christmas roast chicken.

Within this family microcosm lies a larger problem.

Most of today’s supercomputers don’t have the working memory to hold countless combinations inherent in more pressing problems than a Christmas table plan.

But combinatorial optimization is not an academic curiosity.

Optimization is a business problem for many industries.

A logistics company delivering to dozens of cities, for example, searches for the optimal route to save time and fuel.

A super fund wants to balance the risks of their large investment portfolios.

And a pharmaceutical company wants to simulate the action of molecules in search of a drug breakthrough.

Our current computers struggle to cope with these issues.

In a way, our computers must themselves be optimized.

Quantum mechanics provides the means.

As tech giant IBM explains:

Quantum computers can create vast multidimensional spaces in which to represent very large problems. Conventional supercomputers cannot do this.

Algorithms that use quantum wave interference are then used to find solutions in this space and translate them into forms we can use and understand.

Quantum computing is also faster.

Finding an item in a trillion-dollar list, where each item takes a microsecond to check, would take a typical computer about a week.

A quantum computer would take about a second.

Quantum computing is another advancement in the evolution of computing.

And one of the many emerging applications of quantum computing is coming up against a trend we talked about earlier – electric vehicles and their lithium-ion batteries.

Giant automaker Mercedes-Benz, for example, recently partnered with IBM to use quantum computing to help develop electric vehicle technology.

As Newsweek reported:

What could have taken decades to research can be done in a few years. Over a 2-3 year time frame and approximately 300,000 drivers tracked as data points, IBM and Mercedes-Benz are working to understand the complex chemistry inside a lithium-ion battery in order to shorten the improvement development times.

In addition to battery research, Riel says using quantum computing can also accelerate the search for new types of materials that can be used to build cars. Running simulations that examine how these potential materials interact with chemical catalysts, such as corrosion, can cut development times by years.

The revolutionary potential of quantum technology is not lost on investors.

In 2020, investors spent US$557.5 million in 28 venture capital deals for quantum computing companies in North America, more than three times the amount invested in 2019.

In July 2021, a private company, PsiQuantum, alone raised over US$450 million to build a commercially viable quantum computer.

And according to PitchBook Data, global venture capital investment in quantum computing reached US$1.02 billion in 2021, more than poured into the industry in the previous three years combined.

Source: pitchbook data

Quantum Computing, Chips, and “Moore’s Law on Steroids”

Developments in quantum computing are progressing alongside integrated circuits.

As Peter Diamandis and Steven Kotler wrote in their book Abundance: the future is faster than you think:

By 2023, the average thousand-dollar laptop will have the same computing power as a human brain (about 1016 cycles per second). Twenty-five years later, that same average laptop will have the power of all human brains currently on Earth.

More importantly, it’s not just integrated circuits that are advancing at this rate.

In the 1990s, Ray Kurzweil, director of engineering at Google and co-founding partner of Peter at Singularity University, discovered that once a technology goes digital, that is, once it can be programmed into the ones and zeros of computer code, it jumps on the back of Moore’s Law and begins to accelerate exponentially.

Simply put, we use our new computers to design new, even faster computers, which creates a positive feedback loop that further accelerates our acceleration, what Kurzweil calls the “Law of Accelerated Returns.”

The technologies currently accelerating at this rate include some of the most powerful innovations we’ve come up with: quantum computers, artificial intelligence, robotics, nanotechnology, biotechnology, materials science, networks, sensors, 3D printing, augmented reality, virtual reality, blockchain, etc.

One of the key laws underlying the technological revolution of the past 30 years is Moore’s Law.

In 1965, Intel founder Gordon Moore noticed a trend: the number of transistors on an integrated circuit was doubling every 18 months. Which means that every year and a half, computers became twice as powerful.

number of transistors on computer chips

Source: Our World in Data

MIT Technology Review noted that the most important technological breakthroughs we now take for granted’almost without exception, are only possible because of the computational advances described by Moore’s law.

But over the past few years, Moore’s Law has slowed down.

Integrated circuits are improving by reducing the space between transistors, allowing us to pack more of them on a chip.

In 1971, the channel distance – the distance between transistors – was 10,000 nanometers. In 2000, it was about 100 nanometers. Today, it’s closer to just five.

Such a microscopic distance hampers the computational ability of electrons. Reducing this distance brings us closer to the hard physical limit of transistor growth.

In 2020, MIT Technology Review published an article on the ‘gradual decline‘ of Moore’s Law, noting that many ‘leading scientists have declared Moore’s law dead in recent years‘. Even the CEO of giant chipmaker Nvidia agreed.

Again, however, quantum computing offers hope.

Peter Diamandis and Steven Kotler write in Abundance: The Future Is Faster Than You Think:

Kurzweil’s point is that whenever an exponential technology reaches the end of its usefulness, another arises to take its place. And so it is with transistors. Currently, there are half a dozen solutions to the end of Moore’s Law.

Alternative uses of the materials are explored, such as replacing silicon circuitry with carbon nanotubes for faster switching and better heat dissipation. New designs are also underway, including three-dimensional integrated circuits, which geometrically increase the available area.

There are also specialized chips that have limited functionality, but incredible speed. Apple’s recent A12 Bionic, for example, only runs AI applications, but does so at the blazing speed of nine trillion operations per second.

Yet all of these solutions pale in comparison to quantum computing. In 2002, Geordie Rose, the founder of one of the first quantum computing companies D-Wave, proposed the quantum version of Moore’s Law, known today as Rose’s Law. The idea is similar: the number of qubits in a quantum computer doubles every year. Yet Rose’s Law has been described as “Moore’s law on steroids’, because superimposed qubits have far more power than binary bits in transistors.

A little about us — Fat Tail Investment Research

While themes and trends may come and go, one thing that never goes out of fashion in the investment world is insightful analysis.

Information is the crucial ingredient of markets.

But information alone is not enough.

It’s the rational analysis of information that separates a healthy idea from a weak idea.

At Fat Tail, our editors pride themselves on providing valuable insight by applying their industry experience and knowledge.

At Fat Tail, we value differences.

Disagreement is not censored but encouraged.

And we find that our readers appreciate the range of thoughts and ideas of our editors.

At Fat Tail, we have bulls, we have bears, we have crypto advocates and gold bugs.

At the heart of it, however, we have a team dedicated to the free exchange of ideas. Reason trumps agenda here.