If you’re an investor who likes paying attention to the latest tech developments and getting your shares bought during the early days of a tech that’s just on the cusp of exploding, you’ve landed on the right blog.
While it’s always a gamble with newer companies and no one can fully predict outcomes, educated gambles are often where the largest investment growth comes to fruition.
Right now, my bullish tech pick of 2022 is a company whose financials are hardly ground-breaking, but one offering tech that will soon be so necessary, investing in it seems the only sensible choice.
Let’s take a look at Arqit Quantum, Inc., the brainchild of a team of satellite gurus, the father of SSL and former security heads at British Intelligence’s GCHQ.
The tech
The stuff under the hood at the British company is simple: cyber security and quantum encryption that’s safe against all current types of cyber attacks, but also against quantum computers. Using symmetric encryption (two private keys, as opposed to one public and one private) will be a sure-fire way to protect against quantum computers, but previously, the question of how to deliver the private keys in a scalable way was a baffling one. That’s where satellite delivery comes in. Arqit plans to construct and launch two quantum encryption satellites with Virgin Orbit in 2023 to protect against growing hacking threats.
And as everyone who’s anyone has pointed out, PKI is an outdated method that will be rendered obsolete as soon as these computers are available to governments.
The investment case
Arqit CEO David Williams perhaps put it best in the company’s 2021 fiscal year-end report, saying: “The trends which underpin the need for Arqit’s products continue to grow. Instability of the current PKI infrastructure persists. The acceleration of the development and capabilities of quantum computers is profound (e.g. IBM’s recent announcement of a 127-qubit quantum processor).
“As a result, we find that every major potential customer is now well aware of the scale of the problem and the unsuitability of alternatives. So-called Post Quantum Algorithms are not definitively quantum safe, are too burdensome for operations on small devices and will take a decade to implement. By contrast, Arqit’s lite software agent inserts keys into the AES256 architecture which is already standardized in all of the world’s major software systems, making our product not only quantum safe but also simple to deploy.”
I’ve updated and expanded the compelling investment case from Arqit’s website and here is why I think Arqit is a goer you should buy into:
- Product solves an existential threat to the entire digital world – they aren’t exaggerating about this: IBM’s set to launch it’s scalable, self-correcting model in 2023, and Google, Microsoft, the Chinese and American governments aren’t far behind!
- Quantum cyber attacks will cripple infrastructure and services – which QuantumCloud prevents.
- QuantumCloud V1.0 released in July 2021 – 1 is due in Feb, meaning it’s already been tried and tested, first when the company was in stealth mode for four years and now, with customers all over the world.
- Strong customer base – and by this, I mean the US, Japanese, Italian and UK governments, not to mention Virgin Orbit, Honeywell, qtlabs, etc, etc, ad nauseam.
- $130m in contracts already from blue chip enterprise and government customers and $1.1bn+ pipeline – Recently, Arqit formed an international federation of G7 companies and government organisations to provide end-to-end “private instances” of Arqit’s technology stack which will be under the command and control of each federation customer.
- A cloud delivered model – that means customers all over the world and an easily scalable model.
- Globally unique and highly protected technology – no one else solves the quantum threat in the way Arqit does.
- Arqit is four years ahead of the rest of the world, with 1,435 patent claims inprocess – meaning that the company will stay ahead of the curve without this intelligence being stolen.
- Management team – comprising members of GCHQ, one four-star US general, and two other high-ranking US or UK military personnel; not to mention Taher Elgamal.
- Vast experience of leadership in technology, defence and intelligence
- High EBITDA margins – always a positive sign.
- Minimal operating expenses and operational leverage expected to result in c.70% margins.
The conclusion
While Arqit may not be pulling in the big numbers, I’d rather see a tech company slowly, surely and confidently completing its takeover rather than rushing in foolishly and letting shareholders down later. If the big players in government, tech, defence and aerospace believe in Arqit’s tech and vision, it’s only a matter of time before they really take off. And I, for one, want a seat aboard that shuttle.
