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The authors analyze the computational power and limitations of the recently proposed 'quantum adiabatic evolution algorithm'. Adiabatic quantum computation is a novel paradigm for the design of quantum algorithms; it is truly quantum in the sense that it can be used to speed up searching by a quadratic factor over any classical algorithm. On the question of whether this new paradigm may be used to efficiently solve NP-complete problems on a quantum computer, we show that the usual query complexity arguments cannot be used to rule out a polynomial time solution. On the other hand, we argue that the adiabatic approach may be thought of as a kind of 'quantum local search'. We design a family of minimization problems that is hard for such local search heuristics, and establish an exponential lower bound for the adiabatic algorithm for these problems. This provides insights into the limitations of this approach. It remains an open question whether adiabatic quantum computation can establish an exponential speed-up over traditional computing or if there exists a classical algorithm that can simulate the quantum adiabatic process efficiently.