Quantum funding shift moves from hardware to practical uses
A new report argues that investors must pivot toward building software applications that solve specific business problems, rather than continuing to pour capital into the physical machines themselves.
Investors have poured billions into building the physical engines of quantum computing, but a new report suggests the next phase of growth lies in creating software that actually uses those engines. According to analysts from Novo Holdings, the industry is over-indexed on hardware and under-invested in the applications that would make the technology useful for everyday business decisions. The report, reviewed by GN technics/hardware, argues that without this shift, the massive capital already spent on processors may not translate into real economic value.
The core argument is that hardware provides the raw power, but applications connect that power to specific problems customers are willing to pay to solve. Novo Holdings points to life sciences as a particularly promising area, noting that pharmaceutical companies already spend heavily to improve molecular design. Early quantum tools will likely address narrow, high-value tasks within larger classical workflows, rather than replacing existing systems entirely. This approach allows companies to demonstrate tangible benefits before the technology matures further.
Capital flows favor physical components
Data presented in the report indicates that roughly 70% of the $13.9 billion invested in private quantum companies between 2014 and 2025 went directly to hardware and components. This figure excludes public market transactions and government funding, which would likely push the total higher. While this concentration was necessary to advance the underlying technology, it has created a significant gap in the application layer. Analysts describe this as an imbalance where the supply of computing capacity is growing faster than the demand for tools that utilize it.
Value comes from control points
Rather than viewing the market as a simple hierarchy of hardware, software, and applications, the report proposes that value will collect around specific control points. These are capabilities that are difficult to reproduce, become embedded in customer operations, and remain under the control of a single company. The analysts draw a parallel to the semiconductor industry, where companies like ASML, TSMC, and Arm captured lasting value by controlling specific, scarce parts of the supply chain. In quantum computing, this means looking for positions where a company can own a unique capability that customers depend on, rather than just building another processor.
This framework challenges the idea that technical difficulty alone guarantees commercial success. While quantum processors are technically scarce, they require massive capital and remain divided among competing architectures. The report suggests that the most defensible positions will be those that meet three criteria: the capability must be scarce, customers must become dependent on it, and the company must be able to retain ownership of the resulting economic benefits. This shifts the focus from raw computing power to strategic positioning within customer workflows.
Life sciences offer early opportunity
Life sciences stand out as a sector where quantum applications can find immediate traction. Companies in this field already pay premium prices to improve high-value molecular decisions, such as drug discovery. By targeting narrow problems within these existing workflows, quantum tools can demonstrate value without waiting for fault-tolerant computers to become widely available. The report notes that this approach allows for the development of domain-specific algorithms and vertical platforms that are comparatively underfunded today but could become critical infrastructure in the future.
The catch, however, is that these early applications will likely be limited in scope. They will not replace classical computing but will instead handle specific sub-tasks where quantum mechanics offers an advantage. For investors, this means that the next wave of value will not come from buying more hardware, but from backing companies that can build these specialized, defensible applications. The report concludes that those who establish these control points now could capture a large share of the technology's lasting economic value, while those who continue to focus solely on hardware may find themselves with powerful but underutilized assets.
