D-Wave CEO talks quantum computing's capabilities & what's next

D-Wave (QBTS) CEO Alan Baratz sits down with Julie Hyman on Market Catalysts to outline the quantum computing company's current offerings, growth opportunities, and business model. The CEO also shares his expectations for quantum computing advancements and competition with China in the space and teases potential upcoming acquisition plans.

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Video Transcript

00:00 Speaker A

Turning to me now to discuss Alan Barrett, who is D-Wave's CEO. Thanks for being here.

00:06 Alan Baratz

Thank you for having me.

00:08 Speaker A

So obviously, there has been this huge upsurge in interest in and knowledge about quantum, although I think we're all still learning quite a bit about it. What do you think of all of these sort of competing timelines, especially when you guys are already making these machines?

00:23 Alan Baratz

Making them and we have customers using them today as part of their business operations. So we're truly commercial. There are a number of different approaches to developing quantum computers. Some of them will take longer to mature, some of them are near term. At D-Wave, we provide what's called annealing quantum computers, and those are commercial today with companies like NTT DoCoMo or Ford, ArcelorMittal, Pattison Food Group, all using us today to help benefit their businesses.

01:02 Speaker A

So for people who are interested in investing in something like quantum computing, what is the use case today for the computers that you're selling versus the next step and the step after that and the step after that?

01:16 Alan Baratz

So, um, I think about it in three phases, near term, medium term, long term. In the near term, there are a broad array of problems that we typically think of as business optimization problems. This can be anything from workforce scheduling to manufacturing, plant floor optimization, even protein folding. And these problems can be addressed today with D-Wave's annealing quantum computers. And so the companies that I mentioned a minute ago are all using us for business optimization. In the medium term, I think that quantum is going to make a significant impact on AI and machine learning. Specifically, quantum computers are very fast and very energy efficient. And what this means is that all this rhetoric around AI requiring nuclear power plants and massive energy generation stations is likely not going to be required to anywhere near that level once quantum computers are a part of the training process.

02:42 Speaker A

But when is that?

02:45 Alan Baratz

I think that we may be able to get there within a year or two. We're not, this is medium term. We're not talking about long term. In fact, at D-Wave, we announced a few days ago a first step toward this by introducing an AI machine learning platform that developers can use to start investigating how to use quantum for large language model training. But we still have a ways to go on developing that technology and bringing a complete product to market. And then longer term, we're talking about, you know, almost unimaginable things like designer drugs where we could develop a drug that would address just your specific set of ailments.

03:39 Speaker A

Um, so, you know, for people who are investing in stocks like yours and others, you know, obviously you've seen crazy gains in the stock that are are exponential. What do you think is still, um, sort of the biggest misconception or what do you, what kind of education do you have to do for investors and potential investors?

04:06 Alan Baratz

Well, there are quite a few different quantum computing companies that are pursuing different approaches to developing their systems. And so I think you really need to take a look at which of these companies are talking about delivering products five or 10 years from now, and which of them are delivering products in the near term. I'm very proud of the fact that we are delivering products today that are creating value. And so I think that that's a really good place to start. But there is huge long-term opportunity as well.

04:40 Speaker A

Um, and I, I should mention the opportunity there. You guys have been growing a lot, but you're still relatively small in terms of the revenue that you bring through the door. And so how quickly do you expect that to ramp up? At some point, is there sort of a tipping point?

05:02 Alan Baratz

Yeah. So there are two components to our business model. One is a service-based component, what we call quantum compute as a service. And for commercial companies that really just care about leveraging quantum to get better solutions to their applications, quantum compute as a service is the ideal model. But it takes time to build a revenue base around that because it's a service-based business. It's a recurring revenue business goodness, more predictable revenue growth in the long term, but it takes time to build that base of revenue. We also sell systems. Now, we just started selling systems only about six months ago. We sold our first system to the Ulix Supercomputing Center in Germany. Um, that is a very complementary model because it's a to supercomputing centers, government labs, so not necessarily commercial.

06:00 Speaker A

So more research based.

06:02 Alan Baratz

More research based, but it's near-term revenue recognition. As soon as we install and deliver the system, we recognize revenue up front. So I think the two will work together very well to allow us to build both near-term revenue more rapidly, as well as that base of longer-term recurring revenue.

06:23 Speaker A

Now, I, I know you guys have, um, you don't yet, haven't made a lot of acquisitions, but you're thinking about, thinking about how you want to make acquisitions. I don't know if that's the right way to put it, but what, where are you kind of in that process? And what would be complementary for you guys?

06:46 Alan Baratz

So over the course of the last six months, we were fortunate enough to be able to raise a fair amount of cash through at the market transactions. And, and we thank all our shareholders, and we work every day to try to make them proud of D-Wave and comfortable with their investment. But we now have over 800 million in the bank, and that's well more than we need to achieve profitability, we believe, um, based on our normal, uh, course of business. So we are now looking at trying to accelerate growth through acquisitions. We haven't talked about what the acquisition strategy is. We've been working on it for the last few months. Um, I hope to be able to announce something in the near future, but we're very excited to now have the opportunity to pursue that.

07:43 Speaker A

All right. Well, obviously, we'll stay in touch on that. And lastly, I wanted to sort of zoom back out. And I, I'm curious about the competition between the US and China. Um, we've obviously seen it in AI. How is that playing out in quantum computing? And is there a risk that we see, you know, them outpacing us as they have tried to do in some other technologies?

08:05 Alan Baratz

There's absolutely a risk. So China is by far investing more in quantum than any other country. Um, they're leading at about 17 billion. Uh, if we take Europe, the EU, all those countries together, it's about 11 billion, and the US is at about 5 billion. So we are behind China significantly. In fact, you know, all countries in the world are well behind China. So I do think it's important for the US to really start focusing on a better strategy for quantum and really to up that investment.

08:47 Speaker A

Have you gotten heard any glimmers of that from Washington? There's obviously been a lot of focus on AI there, but what about quantum?

08:56 Alan Baratz

Yeah, I, I mean, look, the, the premier funding mechanism for quantum in the US is called the National Quantum Initiative. Uh, and that was put into place under the initial Trump administration. It was supposed to be renewed under Biden. It never got renewed. It still hasn't been renewed. So we really need to get focused on getting that renewed, getting the right programs in place, and making sure that the US is the leader in quantum computing. Related Videos

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