US and China pour $2B into quantum race as cold war heats up

The US Commerce Department committed $2 billion to quantum computing firms in exchange for ownership stakes, while China's Taiyi Quantum raised $44 million in Pre-A funding, escalating a race for technological supremacy with national security implications.

"It is clear that we are now in a race for this technology," said Jay Gambetta, research director at IBM, which received half of the US funding package and will partner with the Commerce Department to build a standalone quantum chip foundry called Anderon.

The US deals, structured as a pseudo-sovereign wealth fund mechanism, reached nearly all publicly traded pure-play quantum firms except IonQ, which was absent from talks. Google Quantum AI declined participation, citing conditions that would slow engineering progress. Shanghai-based Taiyi Quantum nearly doubled its original $29 million target, reflecting intensifying state-backed development in China, where quantum computing is designated as one of seven "future industries" in the latest Five-Year Plan.

Quantum systems are expected to crack the encryption protecting much of the world's data within years, making the technology a national security asset. A mid-June executive order accelerated the US migration to quantum-safe systems to 2031, while Jefferies analysts project the race will accelerate this year, with Barclays predicting evidence of quantum superiority on useful problems within 12 to 24 months.

Patents and Progress: A Neck-and-Neck Sprint

Data from McKinsey and Barclays Research shows the US and China are nearly tied in quantum patent volume, with China leading in quantum communication and the US ahead in quantum sensing and computing. China operates the world's largest integrated space-to-ground quantum network, a lead built through sustained investment. "China definitely has a lead in quantum communication," said Joe Fitzsimons, CEO of Horizon Quantum. "It really depends where you put in the investment."

The last time the US faced a comparable technology gap was in the 1940s Manhattan Project, which produced the first atomic bomb in 1945; China followed in 1964. IonQ CEO Niccolo de Masi said the quantum gap is narrower. "I hope they're 10 quarters behind, but they're definitely not 10 years behind," he said.

State Control vs. Market Forces

China's quantum ecosystem is increasingly consolidated under state control. Baidu and Alibaba shuttered dedicated quantum research groups in 2023, transferring equipment to the Beijing Academy of Quantum Information Sciences and Zhejiang University. Tencent remains the only major Chinese tech firm still operating its own quantum lab. QuantumCTek, the first quantum technology company listed on a Chinese exchange, is now majority-controlled by China Telecom Quantum Group and serves as a key government supplier. Its shares rose 3.75 percent.

Last year, Shenzhen-based SpinQ made history as the first Chinese enterprise to ship a complete superconducting quantum system overseas, highlighting the country's growing export capability in the sector.

In the US, the Commerce Department's ownership-stake structure marks a departure from traditional grants, blending industrial policy with direct government investment. IBM's Gambetta said the state has a responsibility to consult with experts across academia and the private sector. "If I'm still talking about the potential of quantum computing five years from now, we've failed," he said. "We need to make this exist for our nation."

Market Reaction and Forward Outlook

Investors have responded to the escalating competition. IonQ shares gained 9.27 percent, while Quantinuum, the Honeywell spinoff that overtook IonQ as the largest quantum pure play by market capitalization, fell 3.61 percent. IBM rose 2.35 percent. Christian Weedbrook, CEO of Xanadu Quantum Technologies, described China's quantum effort as "a huge black box" in an earlier interview, highlighting the difficulty for US investors in assessing Chinese progress.

Barclays analysts described China as an emerging quantum computing hub, noting that state involvement in the industry has intensified in the last two years. Jefferies projects the race will accelerate this year, with both governments pouring resources into a technology that could reshape global data security, defense systems, and scientific computing. The US executive order signed in mid-June mandates federal agencies to accelerate migration to quantum-safe cryptography by 2031, creating compliance-driven demand for quantum security solutions across government networks.

This article is for informational purposes only and does not constitute investment advice.