The US government’s backing of two Australian quantum companies to receive funding from its CHIPS and Science Act significantly boosts investment prospects for local players, according to sector experts polled by Mergermarket.

Australia’s Diraq and PsiQuantum are two of the nine quantum computing companies that will receive funding from the US Department of Commerce in exchange for minority, non-controlling stakes in each company, as announced last week (21 May).

University of New South Wales’ (UNSW) spin-out Diraq, which will receive USD 38m, is the only silicon-based company included in the nine, while PsiQuantum, which was founded by Australian scientists but is now headquartered in Palo Alto, California, will receive USD 100m as it builds the world’s first utility-scale, fault-tolerant quantum computer in Brisbane.

Diraq and PsiQuantum being singled out for support by the US government will attract the attention of investors that are interested in the quantum sector and are trying to identify where to place their capital, said Allens partner Michael Ryan and chair Chelsey Drake.

The CHIPS Act funding materially changes the perception of the quantum sector globally and further validates the Australian sector on the global stage, said Leigh Golombick, director, Mergers & Acquisitions at Sydney-based Morgan Shaw Advisory.

This will help local companies planning capital raises, she said, noting that current deal activity is almost entirely structured around Series A and B rounds. Extra inbound interest from US and European deep tech investors can also be expected, she added.

Canberra-based Quantum Brilliance, for one, which already counts US venture capital (VC) firm In-Q-Tel among its investors and has raised some USD 50m since spinning out of the Australian National University in 2019, told Mergermarket in March it is undertaking a “large” Series B fundraising to advance its quantum sensing programme.

In April, Sydney-based Deteqt, which recently closed a AUD 5m (USD 3.5m) seed round, flagged a 2027 Series A “in the 10s of millions” and targeting a US-based lead investor, while Melbourne-based Phasor Quantum, which is solely owned by its four undiluted founders, told Mergermarket earlier this month it is considering bringing in its first external capital.

M&A a little way off

As the sector in Australia is still in the capital raising phase, M&A activity is probably a little way off as it remains relatively nascent, Allens’ Ryan and Drake said.

Early M&A in the US like NYSE-listed quantum hardware manufacturer IonQ’s USD 1.8bn purchase of semiconductor maker Skywater this January indicates a broader trend, with major tech, semiconductor, and data centre companies likely to pursue quantum firms as technologies increasingly complement AI advancements, noted Diraq founder Andrew Dzurak.

M&A in the US mostly takes the form of vertical integration as large players look to secure supply chains by acquiring entities that play a role in their ‘technology stack’, noted Allens’ Ryan and Drake, citing IonQ’s USD 1.07bn acquisition of UK-based quantum computing company Oxford Ionics in September 2025.

Companies like Microsoft, which invested in Canadian quantum computer builder Photonic’s USD 100m funding round in 2023, are already backing interesting technologies and we can expect to see a lot more consolidation in the next five to 10 years, said Simon Ruffell, CEO of the AUD 84m market cap Archer Materials. The company, which is the only ASX-listed pureplay quantum computing company told Mergermarket earlier this month it will explore commercialisation deal options at the end of the year.

We are likely entering a period of heightened M&A as this is a way to build quickly, especially in industries like quantum and AI with high demand for talent, noted Thomas Ohki, who co-founded Australian quantum computing and sensing company Emergence Quantum in 2025 and has opted to “bootstrap for the first year while staying open to the right investor”.

The sequence matters

“Meaningful M&A is coming, but the sequence matters,” said Morgan Shaw’s Golombick, noting that consolidation will initially take place among complementary technologies like silicon spin and superconducting qubits, neutral atoms and annealing.

However, not all will reach utility scale and the ones that do will likely look very different across different application verticals, creating natural M&A logic for larger platforms to acquire specialist capability, and for complementary hardware and software developers to merge, Golombick said.

Next will be strategic acquisitions by non-quantum companies like cloud providers, semiconductor makers, hyperscalers, defence contractors, cybersecurity firms, advanced materials companies, and large industrial technology groups as well as pharmaceutical firms and financial institutions that have quantum use-cases on their roadmaps, she said.

According to Golombick, the most attractive targets are likely to be companies with defensible IP in enabling infrastructure, quantum error correction, cryogenics, quantum networking, photonics, control systems and cybersecurity applications, rather than just pure compute capability.

The market will also place a premium on businesses that can demonstrate commercially relevant use cases in areas like logistics optimisation, pharmaceuticals, financial modelling or advanced materials discovery, she added.

According to Quantum Australia, which is backed by the Department of Industry, Science and Resources, and promotes Australia’s quantum interests on the global stage, the domestic sector comprises more than 40 firms and 26 research organisations and is projected to generate some AUD 6bn in annual revenue and support nearly 20,000 jobs by 2045.