Moore’s Law sped us through the Information Age.
From solid-state relays in the 40s, through vacuum tubes to transistors and integrated circuits, computing speed has doubled every two years.
It took a computer the size of a large building to put us on the moon. But, with a little know how, we can easily do the same math on the smartphone in your pocket today.
Like every other technology, that processing speed can be put to either good or bad use.
It speeds your stock trades to the exchange. It connects us instantaneously to others around the globe. It lets us solve hard problems in chemistry, biology, and logistics.
But this hyper-capacity for calculation also makes it possible for a bad breed of hackers to steal data vital to your financial well-being – or lock us out entirely from the systems upon which we constantly rely.
The continuation of Moore’s Law means more connections, more data, and more functionality. It also increases our vulnerability to cyber-attack exponentially.
The next computational leap will be a quantum leap. A leap so vast that the encryption systems guarding your identity, livelihood, and even wealth could be rendered obsolete overnight.
A leap that grows closer with every passing day…
Compressing the Quantum Computing Timeline
It was only two years ago that the most skilled physicists and engineers working with quantum computers expected another 15 years to pass before quantum computers could crack the public key encryption guarding the internet.
But advances spurred on by money pouring into the space since then has moved those estimates up significantly. Some think that critical threshold could arrive as soon as 5 years.
It all comes down to qubits. Qubits are to quantum computers as integrated circuits are to traditional computers. IBM seems to be doubling the computing power from qubits every 7 to 8 months. While Honeywell seems on target to double every 6. And Sundar Pichai, Google’s CEO, announced last year that he expected quantum computers to break public key encryption by 2025.
Whatever the actual pace, quantum computing has moved out of the realm of academia and has landed square in the middle of business reality. In fact, according to the Financial Times, there are upwards of 193 startups with the capital and profit-motive to make quantum computing a reality.
And when capital and competition mix, the results tend to blow well past any predictions we can make today.
But we don’t have to wait for the reality of quantum computing to prepare for its inevitable arrival.
Scale, Profits, and a Massive Intellectual Property Moat
Arqit Quantum Inc. (NASDAQ: ARQQ), a U.K. based cyber security company, has developed quantum-proof encryption technology.
The cryptographic algorithm it uses isn’t new. But, up to now, implementing the technology literally required couriers to hand deliver encryption keys between the data centers that use it.
That’s not a very scalable approach.
And given how much data moves between cell phones, TVs, PCs, and even toasters at the very edge of the internet, we need technology that can scale as fast as the data gets produced.
But Arqit cracked the code.
Their technology can beam those quantum-proof keys to every device and application on the planet. And the only thing required of those devices to use those keys is to run a very light application – just 200 lines of code.
That means Arqit’s encryption technology can run on just about anything.
And some big players already see the potential.
$1 Billion Baked in the Cake
The company just went public in September. But they have already lined up $1 billion worth of orders.
Customers include telecom network operators such as Verizon, Juniper Networks, and British Telecom. It includes defense contractors like Northrup Grumman and Sumitomo Corporation. Militaries are also lining up to implement Arqit’s encryption platform into their systems. And even competitors in the encryption space look like they could turn into customers.
Arqit’s solution, which they protect with over 1,400 patents, give the company a very capital light business model. They expect operating costs to consume a mere 30% of revenue in a couple of years. And that leaves a lot of value to flow to the bottom line for investors.
The total addressable market for their services is nothing less than the entire information security market – a $150 billion market on its way to over $190 billion by 2024.
The stock, at just over $15 per share, values the company at about $2 billion. That’s less than 4 times the 2024 expected revenue. And given the scope, scale, and capital efficiency of their solution, that valuation looks like a bargain.
So, consider buying ARQQ. The long-term potential is tremendous.
And for those of you always on the lookout for ways to magnify your gains, join me over at the Prosperity Pub Community on Telegram. Because tomorrow I’ll give you another way to enjoy the full ride of this quantum defender without speculating on short-term volatility.
