Intel Acquires Israeli Quantum Firm Classiq for $2.3 Billion

Intel has acquired Classiq, an Israeli company specializing in quantum computing operating systems, for $2.3 billion in cash and stock. This deal marks the largest exit to date for the quantum industry, significantly surpassing the previous record of $1 billion set last year when IONQ acquired Oxford Ionics. It is also Intel's most substantial acquisition since purchasing Israeli firm Mobileye for approximately $1 billion six years ago, though Intel has made smaller acquisitions of Israeli companies like Granulate since then.

While the sum might seem modest compared to recent large exits in the cybersecurity sector, it represents a dramatic development for the quantum computing field, which, despite considerable buzz, has yet to achieve widespread commercial applications. Currently, only 117 quantum computers exist globally, and they remain expensive and inaccessible. Despite decades of promise and recent breakthroughs, the field has not yet experienced its "ChatGPT moment."

Israel is recognized as a leading nation in quantum technology, ranking among the top five globally in terms of company numbers and private investment. The Classiq acquisition is expected to attract increased investor attention and further propel the development of quantum technologies in the country, mirroring the impact of the Mobileye sale to Intel a decade ago, which spurred a wave of investments in Israeli tech companies.

Classiq, founded in 2020, employs 150 people and has achieved impressive growth, with its valuation reflecting a high multiple for a young company. The founders, CEO Nir Minervi, VP of Product Amir Naveh, and VP of Technology Prof. Yehuda Naveh, are set to receive substantial personal returns, estimated between $80-100 million each. Employees holding 10% of the company's shares will share approximately $230 million, with Intel also allocating over $100 million for retention bonuses.

The company's unique offering is its operating system software that bridges the gap between complex quantum hardware and end-users, aiming to be the "Windows" of quantum computing, with IBM as its primary competitor. Classiq is reportedly gaining market share and serves diverse clients including BMW, Rolls-Royce, HSBC, Deloitte, Toshiba, and Citi. Investors are also set for significant returns, with Antara Capital expected to gain over $300 million on a small initial investment, and TEAM8 CAPITAL holding a 9% stake. Notably, The Phoenix insurance company's policyholders, holding a 7.5% stake, are also expected to benefit, a departure from typical Israeli exits that often exclude local retail investors. As Classiq is registered in Israel, the country is anticipated to benefit from taxes on the transaction, although the inclusion of Intel stock in the payment means proceeds will not be immediate.

Lip-Bu Tan, Intel's current CEO, was an early individual investor in Classiq before taking his current role and reportedly recused himself from discussions regarding the acquisition. Other notable investors include Dave DeWalt, founder of McAfee. Classiq had previously considered an IPO on Wall Street, but the current deal's valuation positions it among the top five most valuable quantum companies globally.