Can Hong Kong stocks take advantage of the quantum concept "Fengqi"?

Human history is undoubtedly a history of technological innovation. From ancient times of primitive existence to modern life today, every step forward in human society is accompanied by continuous technological innovation. For example, the first industrial revolution ushered in the steam era. The second industrial revolution brought humanity into the electrical era. The third industrial revolution led humanity into the information age. So, what is the fourth technological revolution? What will it bring? According to rumors, high-temperature superconductors, quantum computers, super storage devices, nuclear fusion, super high-speed railways, cures for AIDS and cancer? As long as two or three breakthroughs are made and energy or computational limits are addressed, a new technological revolution can be considered to have arrived. The capital market has always favored "new stories." The market is clearly eager for the arrival of the "Fourth Industrial Revolution." Last week, Alphabet Inc. Class C announced the launch of the groundbreaking quantum chip Willow, and stocks related to quantum computing have been gaining attention recently. Overnight, on December 17th, US stocks related to quantum computing surged, with Quantum Computing (QUBT) closing up by 52%, DWave Quantum (QBTS.US) up by 16%, and Rigetti Computing (RGTI.US) rising by 32.03%. On December 18th, A-shares related to quantum computing also surged, with Koal Software (603232.SH) hitting the limit up, Quantumctek Co., Ltd. (688027.SH) rising by 8.57%, and GuoChuang Software (300520.SZ) following with a 5.04% increase. In response to this, analysts from Bank of America Corp pointed out that while the applications of quantum computing are still in their early stages, the release of Willow has had a significant impact on market sentiment. US Senator Maria Cantwell (Washington State Democrat) stated: "Advancements in quantum science and technology will change the game. From breakthroughs in healthcare to solutions for Clean Energy Fuels Corp., quantum applications in sensing, computing, and communication will reshape our future." While it is not certain if quantum computing will reshape the future, it is clear that it has already reshaped the "future" of related concept stocks IONQ (IONQ.US) as a leader in US quantum technology stocks has seen its stock price nearly quadruple since September 26. Quantumctek Co., Ltd., as a leading A-share quantum technology company, has also doubled its stock price since early September. Next, let's take advantage of this wave of rising concept stocks to get a glimpse of the early trends in this wave of technology. Strategic importance highlighted, market size may reach billions by 2030 Quantum technology has been around for over a hundred years. Modern information technology, computers, communications, global positioning systems, and other developments in human-driven quantum science are closely related to the applications of quantum technology. Quantum technology mainly includes quantum computing, quantum communication, quantum sensing, quantum detection, quantum measurement, and others, all of which are recognized as potentially disruptive to various industries and fields. For example, quantum communication can partially replace traditional communication encryption technologies, achieving unconditional key security; quantum computing can break through the physical limits of traditional chips, achieving computing power a million times faster than traditional computers; quantum radar made using quantum detection technology can achieve anti-stealth detection, breaking the operational advantages of stealth weapons; quantum sensors have ultra-high sensitivity and microscopic size, able to output accurate battlefield spatio-temporal information such as precise positioning, navigation, and timing in GPS-denied environments; quantum measurement can use natural baselines based on quantum physics to replace physical baselines, achieving extremely high measuring accuracy. However, quantum technology is still in its early stages. This indirectly underscores the significance of the "Willow" quantum chip from Alphabet Inc. Class C. This quantum computing chip from Alphabet Inc. Class C can complete tasks that currently take the fastest existing computers at least 10 to the power of 25 years in just 5 minutes, while also possessing outstanding error correction capabilities. Currently, high fault tolerance has been a major obstacle to the advancement of quantum technology, so the birth of "Willow" can be said to pave the way for creating "practical large-scale quantum computers." As the strategic importance of quantum technology becomes increasingly prominent, many countries are also increasing their investments and attention towards quantum research and development. Starting in the Fourteenth Five-Year Plan period, quantum technology has been mentioned in national-level planning and official documents in China at least 12 times. In the Central Economic Work Conference in December 2023 and the government work report of March 2024, quantum technology was identified as an important track for promoting new quality production. In addition to China's increased investment in quantum technology, countries worldwide have accelerated their planning and layout in the field of quantum information in the past five years. According to reports from the Institute of Information and Communication Engineering, six countries released national strategies and investment plans for quantum information one after another in 2023, with a total planned investment scale of 6.7 billion US dollars. As governments continue to intensify their layout of quantum technology, the enthusiasm of the capital market towards quantum technology is also growing. According to ICVTA&K data, the total global financing scale of quantum technology in 2020-23 was 21.2/29.1/33.9/19.0 billion US dollars, mainly concentrated in the field of quantum computing. In 2023, China's financing scale in the field of quantum computing accounted for 8.1% of the global total. Of course, the expansion rate of the quantum technology market size is undoubtedly much greater than the financing scale. According to ICVTA&K's forecast, the overall market size of the global quantum industry in 2023 could reach $7.24 billion, with computing, communication, and measurement sectors amounting to $4.7 billion, $1.08 billion, and $1.46 billion respectively.By 2030, the global quantum industry market size could reach $239.1 billion, with a corresponding compound annual growth rate of 65%, with computing, communication, and measurement sectors reaching $215.5 billion, $19.7 billion, and $3.87 billion respectively.Looking at the data above, it is undeniable that the development potential of the quantum technology sub-market is the largest among the three. Currently, the industry believes that the end of 2027 to the beginning of 2028 could be a milestone for quantum computing. In terms of market size, the global quantum computing market could reach $43 billion in 2028, closer to the general-purpose computing of electronic computers today, or become the main driver of industry growth after 2028. By 2035, the global quantum computing market could reach $811.7 billion. As can be seen from the above, with the continuous breakthroughs in quantum technology, there is ample possibility for the next decade to become the "golden age" of quantum technology. The industry's future looks promising. Which Hong Kong concept stocks are worth paying attention to? Looking at the three major areas in detail, the development speeds of quantum technology, quantum communication, and quantum measurement in these three areas are different. In the field of quantum communication, quantum key distribution (QKD) has the conditions for engineering implementation of a "worldwide" wide-area network and is in the stage of promoting applications on a large scale. Quantum secure communication networks have been elevated to the national strategic level by multiple countries and regions, both domestically and internationally, continuing to carry out product integration upgrades, application integration innovation, and standard system construction. In the field of quantum computing, several quantum computing prototypes have proven "quantum supremacy" in a few specific problems, but they are still in the basic research stage and cannot yet solve complex problems with practical value. It is a global consensus to first achieve specialized quantum computers and then achieve general quantum computers. The related supply chain market, complete machine sales market, and related application exploration market are accelerating. In the field of quantum measurement, a batch of products such as quantum radar and atomic gravity meters have been developed, which can improve the measurement accuracy of various physical quantities such as time, position, acceleration, and electromagnetic fields. Currently in the stage of practical transformation, various technological routes and application scenarios are undergoing engineering exploration to varying degrees. Overall, although quantum communication and quantum measurement are relatively mature in their current deployments compared to quantum computing, with some already in the promotion stage, in terms of market space, quantum computing is still the most imaginative. Looking at the industry chain, the upstream of quantum computing mainly includes components such as lasers and dilution refrigerators, the middle stream includes prototypes and system software, and the downstream includes cloud platforms and applications in vertical fields such as finance and artificial intelligence. The concept stocks included in this industry chain are not many, mainly involving Baidu Inc Sponsored ADR Class A (09888) covering midstream software, Alibaba Group Holding Limited Sponsored ADR (09988) covering downstream simulators, and China Mobile Limited (00941) exploring downstream applications. The upstream of the quantum communication industry chain mainly includes chips, photon sources, single-photon detectors, and quantum random number generators. The midstream mainly includes core equipment, construction of quantum communication networks, encryption network operations, and post-quantum cryptography. The downstream mainly includes security, finance, communications, power grids, and mobile terminals. The concept stocks related to quantum communication chain in Hong Kong are also few, including China Mobile Limited (00941) operating encryption networks in the midstream, China Telecom Corporation (00728); financial institutions in the downstream such as Bank of China, China Construction Bank Corporation, Bank of Communications, and telecommunication companies in the communications sector, such as China Telecom Corporation, China Mobile Limited, and China United Network Communications. Furthermore, the upstream of the quantum measurement industry chain mainly includes lasers, low-temperature systems, materials, electronic components, and magnetic field environments. The midstream mainly includes mature commercial products such as atomic clocks and atomic gravity meters, as well as prototypes such as quantum magnetic field meters and optical quantum radars in the engineering research and application stage. The downstream applications mainly include national defense, aerospace, environmental monitoring, industrial manufacturing, bio-medical, transportation, and energy development. In this industry chain, there are currently no obvious Hong Kong-related concept stocks. It is worth noting that Quantumctek Co., Ltd. is a leading company in China's commercial quantum information technology, and is thus attracting capital attention in this wave of quantum technology boom. Quantumctek Co., Ltd. originated from the University of Science and Technology of China, and since its establishment in 2009, the University of Science and Technology of China Asset Management Co., Ltd. is its largest shareholder. The company entered the field of quantum computing in 2020, providing products for multiple superconducting quantum computing teams through independent research and participation in major projects such as the "Zu Chongzhi Experiment" of the University of Science and Technology of China. On November 21, 2024, China Telecommunications Quantum Group proposed to subscribe for 2248.66 million shares of the company's non-public offering for 1.775 billion yuan, and obtained the approval of the China Securities Regulatory Commission for registration. After the subscription is completed, China Telecommunications Quantum Group will hold approximately 21.86% of Quantumctek Co., Ltd.'s shares and become its controlling shareholder. Therefore, China Telecom Corporation can be considered to have the "dual label" of quantum technology. In conclusion, it is evident that although the quantum technology has not yet brought about the "fourth industrial revolution," the innovation and breakthroughs in quantum technology have already set off a craze in the secondary market, and investors who are always keen on "panning for gold" are clearly unable to contain their excitement.