
Quantum computing vs traditional AI: Which tech stocks are must-haves in 2025?

Summary
- These three tech stocks stand to gain big as the competition between quantum computing and traditional AI intensifies.
The competition for technological supremacy is intensifying, as quantum computing and traditional artificial intelligence (AI) firms invest billions to gain an edge.
While both technologies have groundbreaking potential, their applications are fundamentally different. Quantum computing seeks to resolve issues that conventional computers cannot.
In contrast, traditional AI has already been integrated into our daily routines, providing automation, tailored content, and real-time decision-making capabilities.
Both technologies are anticipated to experience significant growth in the coming years.
The global quantum computing market is expected to surge from about $1.3 billion in 2024 to around $5.3 billion by 2029, highlighting its increasing importance.
Conversely, the global AI market was valued at $233.46 billion in 2024 and is forecasted to expand to $1,771.62 billion by 2032.
With the rapid advancements in quantum computing and AI, investors now confront a crucial question: Which tech stocks will take the lead in 2025?
What is traditional AI?
Traditional AI is a technology that enables machines to mimic human thought and behavior through advanced algorithms and computational systems intended to replicate human intelligence.
These systems process information in bits, which are either 0 or 1. These are trained on large datasets to learn from data, recognise patterns, solve problems, and make decisions.
Traditional AI utilises data-driven techniques such as machine learning, deep learning, and neural networks to analyse patterns, process extensive datasets, and generate accurate predictions.
This technology automates tasks and enhances efficiency. For instance, virtual assistants like Alexa use traditional AI to respond to voice commands.
Netflix and Amazon use traditional AI to analyse user preferences to recommend movies, thus personalising the user experience.
What is quantum computing, and how is it different from traditional AI?
Quantum computing uses “qubits" to process and store information simultaneously as zero and one. It leverages the principle of quantum mechanics to process data, making it more advanced than traditional AI.
This distinctive feature enables quantum computers to tackle and resolve issues faster than traditional computers.
Moreover, it enhances applications like machine learning, allowing them to address highly complex and time-consuming problems that standard computers cannot manage.
This approach offers a novel solution for tackling exponential challenges or complex data processing and procedures.
Unlike traditional computers, quantum computers can tackle numerous problems simultaneously.
Although traditional AI has contributed to advancements in automation and data analysis and has transformed industries like healthcare and finance, its capabilities are limited by processing power and hardware.
Quantum computing addresses the limitations of traditional AI and brings exponential speed and efficiency, which may unlock new possibilities. These include faster model training, solving complex problems, and faster response.
In the current data-focused environment, these features can revolutionise industries, businesses, and even the globe by providing competitive advantages.
Nonetheless, quantum computing is still in the experimental phase, and practical applications may not emerge for another 10 to 20 years.
Companies like Google, IBM, and Microsoft are advancing their quantum computing projects and focusing on hardware advancements.
Conversely, many organisations are concentrating on quantum software, developing algorithms and tailored solutions for finance, pharmaceuticals, and logistics sectors.
With that explainer out of the way, let’s look at the three tech stocks that could take the lead in 2025.
#1 Persistent Systems
Persistent Systems offers software and technology services to assist businesses in implementing and modernisation. Its service offerings include software product engineering, cloud infrastructure, and data analytics.
The company serves global clients, including Fortune 500 firms across multiple sectors, such as banking, healthcare, telecommunications, life sciences, high-tech, and media.
Persistent Systems offers proprietary software and frameworks with ready-made integration and acceleration. It has partnered with industry leaders, including Salesforce, IBM, Google, Microsoft, and AWS.
In terms of financials, Persistent has grown at an industry-leading rate in the past five years. Its revenue has grown at a compounded annual growth rate (CAGR) of 23.9% to ₹98.2 bn, while its profit grew at 25.5% to ₹10.9 bn.
During this period, the company's average return on equity (RoE) and return on capital employed (RoCE) stood at 20% and 26.5%, respectively.
The company remains protected from the recent slowdown in the sector. Its robust performance persisted into the third quarter of FY25, showcasing its 19th consecutive quarter of positive sequential growth.
Revenue jumped 22.6% compared to the same quarter last year to ₹24.9 bn, while profits climbed 30.4% to ₹2.86 bn.
Moreover, earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 21.7%, maintaining a solid margin of 17.7%.
This growth was primarily fueled by the banking, financial services, insurance, healthcare, and life sciences sectors. Geographically, performance was strong across all key regions, including North America, Europe, the Rest of the World, and India.
Currently, Persistent is trading at a price-to-earnings (PE) ratio of around 69.1, a premium of 65% against its 5-year median PE of 41.7. The company's continued outperformance has made the valuation rich.
Looking forward, management has set ambitious mid and long-term targets. It aims to reach a revenue of US$ 2 bn by FY27, up from about $1.2 bn in FY24. In the long run, it has set a goal of $5 bn in revenues by FY31, representing a CAGR of over 23%.
The company plans to concentrate on its top 100 clients, enhance global capability centers, and integrate AI to meet these goals. Moreover, it has a robust order book and pipeline to maintain its growth momentum.
Moreover, Persistent is a leader in disruptive technologies and is dedicated to leveraging AI for both technological and business advancements.
To facilitate this, the company has developed platforms like GenAI Hub, which provides clients with access to generative AI solutions, and iAURA, an AI-driven data solution designed to support data-informed decision-making.
Persistent is ideally positioned to leverage growth through AI capabilities as the demand landscape increases.
#2 Zensar Technologies
Zensar Technologies is a digital solutions and technology services company specializing in IT consulting, cloud solutions, AI-powered automation, and enterprise applications.
It focuses on industry verticals, including hitech & manufacturing, consumer services, banking, financial services, and insurance (BFSI).
The BFSI sector generates the most revenue, 37.7%, followed by Hi-tech, 27.1%, manufacturing and consumer services, 25.6%, and healthcare and life sciences, 9.6%.
Like other IT firms, the company derives most of its revenue from the US which contributes 67.2%, followed by Europe with 20.8%, and Africa with 12%.
Coming to its financials, Zensar's past performance has been tepid till 2022 due to slow revenue growth, margin challenges, and inconsistent deal wins.
However, since Manish Tandon became CEO in January 2023, he has successfully improved the company's margins and growth.
In the last five years, Zensar's revenue has grown at a CAGR of 4.3% to ₹49 bn, fueled by strong performance across various sectors.
Its profit has increased by 15.9%, reaching ₹6.65 bn. The EBITDA margin has risen significantly from a low of 8.5% to 17.8% in FY24.
Zensar's improved profitability and increasing margins over the last two years have contributed to its strong return ratios. The company's average RoE and RoCE were 14.4% and 21.2%, respectively.
The company's performance in the third quarter of FY25 was in line with market expectations. Revenue increased 8.6% to US$ 157 m, while profits fell 2.7% to $18.9 m. Zensar also announced its highest-ever order book of $205 m.
The company trades at a PE ratio of about 28.2, a 24% premium over its five-year median PE of 22.7.
Looking ahead, Zensar is strengthening existing client relationships and acquiring new clients. To bolster its order book, the company is actively engaged in discussions regarding 2-3 significant deals, which it views as pivotal for future growth.
Moreover, it is placing greater emphasis on building annuity revenue, which offers stability instead of depending on discretionary spending. The company recently acquired BridgeView Lifesciences to strengthen its health care and life science vertical.
The company’s management foresees a rebound in discretionary spending over the next few quarters. Additionally, increasing client interest in emerging technologies such as GenAI and Agentic AI will likely boost Zensar’s growth.
#3 Affle (India)
Affle is a global tech firm with a proprietary consumer intelligence platform that turns ads into personalized recommendations. This allows marketers to find, engage, acquire, and convert potential and current users effectively.
The company operates on two platforms: Consumer and Enterprise. The consumer platform aids clients in converting new consumers through mobile advertising.
The enterprise platform offers end-to-end solutions for businesses to improve their engagement with mobile users.
Affle has expanded its operations across Southeast Asia, the Middle East, Africa, North America, and Europe. About 73.4% of its revenue originates from India and emerging markets, with the remaining 26.6% from developed markets.
Financially, Affle has benefited from increasing internet penetration over the past five years. In FY24, its revenue grew at a strong CAGR of 49.2% to ₹18.42 bn, and its profit rose at 43.5% to ₹2.97 bn.
Its RoE and RoCE averaged 22.7% and 23.6% during the period, reflecting efficient utilisation of shareholder funds and strong return-generating capability on investments.
Its recent quarterly performance has also been strong. In the second quarter of FY25, revenue jumped 25.9% to ₹5.42 bn, while profits rose 37.7% to ₹0.92 bn.
Moreover, EBITDA increased 29.9% to ₹1.13 bn, maintaining a solid margin of 21%.
The company trades at a PE ratio of about 61.5, an 8% discount to its five-year median PE of 66.8.
The company is poised to benefit significantly from favourable digital advertising trends. Over the next five years, digital advertising expenditures in India and Southeast Asia are projected to grow at 32.5% and 18% CAGR, respectively.
This growth presents a strong tailwind for the company. Given its dominant position, management is optimistic about sustained growth in the future.
Affle India is anticipating a revenue CAGR exceeding 20% for the next five years, driven by the increasing number of active internet users and the growing penetration of smartphones.
The rise in global digital spending catalyzes the company, spurred by advertisers' increasing investments in digital platforms. The company has pinpointed e-commerce, fintech, and gaming as key sectors showing robust performance.
Conclusion
The race for dominance between quantum computing and traditional AI has reached an unprecedented intensity. Both these technologies offer unique investment opportunities to investors. However, there are challenges, too.
The use case of quantum computing is still decades away from full-scale implementation, making it a risky investment.
In contrast, traditional AI, with its proven track record and widespread adoption, offers a safer choice for risk-averse investors.
However, those with a higher risk tolerance and a long-term outlook may consider monitoring the quantum computing sector as it evolves, recognising its potential to drive future breakthroughs.
For others, waiting for further technological advancements might be prudent before committing.
To make informed decisions, it's crucial to assess the company's fundamentals, including its financial performance, corporate governance practices, and growth prospects, rather than relying solely on the hype.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com