IBM’s Quantum Bet Just Got Bigger—What the HRL Deal Means for Investors
The quantum computing field is continuing to advance. This can be seen from companies diversifying their strategies and governments getting more involved in funding the efforts. It’s against this backdrop that International Business Machines Corporation (NYSE:IBM) has agreed to acquire HRL Laboratories from Boeing Co. (NYSE:BA) and General Motors Co. (NYSE:GM). HRL Laboratories is a…
The quantum computing field is continuing to advance. This can be seen from companies diversifying their strategies and governments getting more involved in funding the efforts.
It’s against this backdrop that International Business Machines Corporation (NYSE:IBM) has agreed to acquire HRL Laboratories from Boeing Co. (NYSE:BA) and General Motors Co. (NYSE:GM). HRL Laboratories is a research lab with deep expertise in advanced materials and quantum technologies, and buying it will give IBM a second platform to work with as it races to build quantum computers.
IBM’s bid to diversify its quantum strategy comes as it faces heating competition from Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT) and other technology leaders in the quantum computing field.
Governments and Big Tech Are Spending Billions on Quantum Computing
Quantum computers are expected to reshape industries across the board, bringing extraordinary capability to solve problems that would take regular computers thousands of years to work through. In light of this, governments and tech companies are seeking to secure leadership in the quantum computing field for both commercial and strategic priorities.
Is IBM Quantum Pivot Worth Buying? Valuation, Hedge Fund Sentiment, and Risks
IBM has committed to investing more than $10 billion in quantum computing efforts over the next five years.
Meanwhile, the US government has announced more than $2 billion to quantum computing companies, including IBM, to boost the industry. According to PitchBook, venture capital funding for quantum technology hit a record $3.9 billion in 2025, and governments around the world have committed more than $60 billion to support quantum computing efforts.
Why IBM Is Expanding Beyond Superconducting Qubits
International Business Machines Corporation (NYSE:IBM) has long focused on superconducting qubits in its quantum roadmap. The acquisition of HRL Laboratories adds expertise in electron spin qubits, which occupy much less space than superconducting circuits.
According to IBM, its quantum systems could benefit from combining superconducting qubits and electron spin qubit platforms. IBM’s Blue Jay system, which is planned for release in 2033, uses superconducting qubit chips. After that, the company plans to broaden its roadmap by including electron spin circuits in its efforts.
IBM is not alone in diversifying its quantum strategy. Alphabet has also expanded beyond its original quantum approach, as it previously added a platform based on neutral atoms. Pursuing multiple strategies helps developers like IBM hedge against uncertainties as the quantum field continues to evolve.
How IBM’s Valuation Compares With Alphabet
IBM and Alphabet differ in both their quantum strategies and valuation. IBM trades at a forward price-to-earnings ratio of approximately 17.5x and a price-to-sales ratio of 3.1x. Alphabet, meanwhile, trades at 26.8x forward earnings and 10.3x sales.
Alphabet’s valuation premium can be traced to the company’s leadership in high-growth industries like digital advertising, cloud computing, and AI. IBM, on the other hand, remains more closely tied to the more established enterprise software, consulting, and infrastructure markets.
Should quantum computing become a significant business, IBM’s lower valuation could provide greater room for multiple expansion.
What Could Drive IBM’s Quantum Opportunity
Adding a second quantum platform through the HRL Laboratories acquisition would strengthen IBM’s efforts in a field that promises long-term growth opportunities. With this deal, IBM gets to broaden its capabilities and reduce reliance on a single platform.
What Could Limit IBM’s Quantum Upside
Commercial deployment of quantum technology is still several years away, and that leaves significant execution risk. Moreover, IBM must integrate HRL successfully and defend against surging competition as mistakes can quickly erode the return on investments.
How Hedge Funds and Short Sellers View IBM
The number of hedge funds with positions in International Business Machines Corporation (NYSE:IBM) stock declined slightly to 59 at the end of Q1 2026, from 63 in the previous quarter. Alphabet’s hedge fund ownership also softened modestly in the same period, declining to 265 from 288.
Cliff Asness’ AQR Capital Management emerged as the largest hedge fund holder in the stock, reporting 1,888,342 shares valued at $455.6 million after aggressively boosting its position by 121% in Q1 2026. Meanwhile, Adage Capital Management, led by Phill Gross and Robert Atchinson, disclosed ownership of 937,390 shares worth $227.2 million, reflecting a more modest 7% increase in its stake.
Regarding bearish bets, IBM’s short interest stood at 3.66% at the end of June, compared to Alphabet’s 0.7%. Both stocks remain popular with elite investors.
Investor Takeaway
By adding spin-qubit expertise to its quantum strategy, IBM is spreading its risks in a promising but uncertain industry.
The opportunity is substantial, and so are the challenges. A breakthrough would unlock massive profit for IBM in both hardware and software markets. But to get there, IBM must prove its performance while competing with well-funded rivals domestically and globally.
While we acknowledge the potential of IBM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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