Updates share move in paragraph 7, adds background in paragraph 5-6

By Harshita Mary Varghese and Aditya Soni

May 21 (Reuters) - The Trump administration will take $2 billion in equity stakes across nine quantum-computing companies, including a new IBM IBM.N venture, as part of efforts to shore up the domestic supply chain and counter China in crucial sectors.

The move shows the growing prominence of quantum computing, where recent technological breakthroughs have deepened investor interest in its potential to speed up processes ranging from drug discovery to financial modelling and cryptography.

The U.S. Department of Commerce said on Thursday that IBM IBM.O would receive $1 billion to set up a new company dedicated to manufacturing chips for quantum computers, while contract chipmaker GlobalFoundries GFS.O would get $375 million to build a domestic factory capable of producing components for several different types of quantum machines.

Other firms including D-Wave QBTS.N, Rigetti Computing RGTI.O and Infleqtion INFQ.N will get about $100 million each, while Diraq will receive up to $38 million to solve key technical hurdles that have held back the development of more powerful quantum computers, the Commerce Department added.

Two of the recipients have ties to the administration. Emil Michael, the Pentagon's top technology official, took D-Wave public in 2022 through a blank-check firm he was heading at the time. PsiQuantum last year raised $1 billion from investors including Nvidia's venture capital arm and Donald Trump Jr.-backed 1789 Capital.

Shares of companies that are part of the deal rose between 6% and 31%.

The funding will come from incentives under the CHIPS and Science Act, which was signed by former President Joe Biden.

The move marks the latest intervention in corporate America by the Trump administration as it seeks to bolster strategic industries in the face of growing competition from China.

Last year, the government converted some CHIPS Act grants as well as unpaid federal incentives into a 10% stake in Intel that made it the chipmaker's largest shareholder. It has also taken a big stake in MP Materials MP.N, a rare-earth mining company.

"These strategic quantum technology investments will build on our domestic industry, creating thousands of high-paying American jobs while advancing American quantum capabilities,” Secretary of Commerce Howard Lutnick said.

UNCERTAIN TIMELINE FOR QUANTUM COMPUTERS

Quantum computers are designed to process information exponentially faster than traditional supercomputers, though the technology still faces major technical hurdles including high error rates that limit their practical performance.

Estimates on when the machines will be ready for practical use vary widely. Nvidia CEO Jensen Huang said last year that "very useful quantum computers" were likely two decades away.

Under Thursday's deal, IBM said it would launch a company called Anderon in New Albany, New York, that would be America's first dedicated quantum chip manufacturing facility. It did not disclose the government's stake in the new company.

IBM will make a contribution of $1 billion to Anderon. It will also give intellectual property, assets and workforce to Anderon and bring in additional investors as the new company scales.

GlobalFoundries said it has launched a new business called Quantum Technology Solutions focused on scaling manufacturing for quantum-computing hardware, while the U.S. government agreed to take an equity stake of about 1% in the company.

Matthew Kinsella, CEO of Infleqtion, told Reuters that the investments underscored the technology's growing potential.

"The government has proven to not fund thus far technologies they would deem as speculative, and I believe that this investment really does further validate that quantum computing is coming much faster than anybody thinks," Kinsella said.