How government support for “quantum champions” interacts with FDI screening, export controls and sovereignty-sensitive investments
Companies and governments around the world are investing billions in the development of quantum technologies. Programs to promote national “quantum champions” aim to secure technological leadership, exploit future economic opportunities, and meet national security challenges. The increase in funding is accompanied by a massive tightening of government controls, which aim to ensure that the country building up quantum capabilities is benefiting from them and to prevent rivals from progressing their own quantum programs. Where strategic capabilities are acquired, protective barriers are consequently erected.
It is essential for investors in quantum technology to understand this interplay between promotion and protection. In particular, foreign direct investment (FDI) screening is becoming a central part of any transaction planning.
Sensitivity of quantum technology
The increased sensitivity surrounding quantum technology stems from its dual-use nature (meaning it can be applied for both civilian and security/defence purposes) and, above all, its disruptive potential. While “quantum computing” gets most of the headlines, policymakers increasingly treat quantum information technologies as a three-part stack, namely quantum computing, quantum sensing, and quantum communications, and the regulatory perimeter is often tighter for some parts of that stack than others. In the civilian sector, the disruptive potential lies in making certain classes of problems that are computationally intractable or economically impractical for even the most powerful classical HPC systems materially more solvable. Conventional computers reach their limits when simulating chemical reactions, developing materials, or optimizing complex logistics systems. This is where quantum computers offer a potentially groundbreaking advantage and promise transformative effects: In pharmaceuticals and chemistry, they could accelerate the development of medicinal products by years. In the energy sector, they could enable the discovery of new battery materials or high-temperature superconductors. In the finance and logistics sector, they could optimize risk models and supply chains with unprecedented efficiency. Mastering these applications promises immense economic competitive advantages and will become a decisive factor in the global technology race. In the defence sector, quantum technology facilitates a fundamental shift in capabilities. Quantum Key Distribution (QKD), for example, enables verifiably secure communication between terrestrial and satellite-based units, protecting strategic data from both, current and future crypto-analytic threats. Furthermore, quantum sensing provides entirely new intelligence-gathering abilities, such as precise detection of underground structures or the tracking of submarines. Quantum computers, in turn, can revolutionize military strategy by enabling real-time, data-driven decision-making for complex logistical operations and massively accelerating the development of novel military-grade materials. The objective is to achieve a decisive strategic advantage.
For example, today, when U.S. and allied forces operate in GPS-denied environments, they rely heavily on conventional inertial navigation systems that drift over time and require periodic fixes from external signals. A quantum inertial sensor (an atom interferometry-based accelerometer and gyroscope) uses the quantum behaviour of ultra-cold atoms (i.e., superposition and interference of atomic matter waves) as a reference, which can materially reduce that drift. The practical outcome is that the sea-based leg of the nuclear triad, especially ballistic missile submarines, can maintain high-confidence positioning for longer periods under strict emissions control, even if GPS is jammed, spoofed, or denied. That matters because assured navigation supports assured targeting and patrol-area survivability, which are core ingredients of a credible second-strike capability. Moreover, early leads in this kind of system compound quickly through manufacturing know-how, calibration data, doctrine, and platform integration, meaning the advantage is less “best-in-class” and more “first to field” in a nuclear quickdraw contest where there is no second place prize.
This potential, combined with increasing geopolitical tensions, systemic competition between East and West, recent conflicts, and a growing emphasis on national sovereignty, means that quantum technology is no longer just a topic for research, but is increasingly becoming the focus of national security agencies.
A global trend: increased protection through FDI regulations
As a logical consequence of the potential security concerns surrounding quantum technology, leading industrial nations have amended their FDI screening regimes to explicitly cover investments in quantum technology.
- In September 2024, the United States implemented new export controls covering certain quantum computing items and key enabling components, and also extended controls to related software and technology required for development or production. As a consequence, U.S. businesses working in these controlled quantum areas very likely qualify as “critical technology” businesses for CFIUS purposes. That matters because certain sub-control minority foreign investments in such a business can fall within CFIUS jurisdiction as a “covered investment” and, in some cases, investments in such companies can trigger a mandatory filing.
- In the EU, key member states have also moved to protect quantum technologies. Germany, France, Italy, Austria, Belgium, Denmark and the Netherlands, for example, have expanded their national FDI laws so that investments in this sector are now subject to approval. The same applies to the UK.
- The EU is expected to adopt a new FDI Screening Regulation in Spring 2026 that would require all EU Member States to make acquisitions of companies that are active in certain sectors subject to approval – and this would include companies that manufacture, research or develop quantum technologies. The new requirement is expected to become operational at the end of 2027 after a transitional period.
For investors, this means that even minority stakes that are far from a takeover can trigger reporting and approval requirements if the target company is active in the quantum sector (the respective thresholds vary from country to country but are typically as low as 10%).
Outbound investment screening
While classical FDI rules screen investment from foreign companies in one’s own country, the US has adopted, and the EU considers adopting, rules that would control the investment of companies with a US or EU nexus in foreign countries:
- US outbound investment review: Executive Order 14105 put the United States in the business of screening outbound investments by U.S. persons as well as inbound foreign investment. Under Treasury’s final rule (effective January 2, 2025) and the Comprehensive Outbound Investment National Security Act of 2025 (to be implemented by 2027), U.S. persons are prohibited from making certain investments in companies in, or with sufficient ties to, China (including Hong Kong) that develop quantum information technologies. By moving from “who can buy into us” to “where our money, know-how, and managerial support can go,” the United States is signalling that quantum is not just a commercial race. It is treated as a strategic capability where funding and expertise can matter as much as hardware.
- Revision of EU regulations: The European Commission presented a white paper on foreign investment, which launched a public consultation and analysis on the risks of foreign investment. This has led to a recommendation to member states to monitor capital outflows in sensitive sectors, including quantum. This recommendation has not been implemented so far.
Conclusion: Tightening of regulatory scrutiny expected
The future of investment control in the quantum sector is clear: regulatory screws will continue to be tightened. This is driven not only by rapid technological progress, but above all by geopolitical realities – systemic competition between East and West and the steadily increasing importance of national security. The main challenge for government regulators will be drawing administrable lines around what elements of the quantum stack actually warrant control and building in enough flexibility into their rules to ensure they remain effective as the quantum landscape continues to evolve. Otherwise, regulators risk drafting rules that are so broad they sweep in routine commercial R&D and chill investment and cross-border collaboration, or so narrow and inflexible that they are always a generation behind the industry state of the art and constantly playing catchup.
For transactions in the quantum sector, early and strategic engagement with global FDI regulations is not an optional extra, but a cornerstone of the success and security of any investment.
Key takeaways for investors
- Risk sector: Any investment in a company active in the field of quantum technology will immediately attract the attention of FDI authorities worldwide.
- Thresholds offer no safe haven: Even non-controlling minority interests are increasingly subject to reporting requirements if the target company is active in a sensitive sector such as the quantum sector.
- A global perspective is crucial: A purely national assessment is no longer sufficient. The interconnectedness of FDI regulations (particularly within the EU) and their extraterritorial reach (as in the case of the US foreign regime) require a global strategy.
- Analyze early: FDI screening must be integrated into transaction planning and due diligence from the outset to avoid delays or prohibition of the deal.
