The focus on quantum computing has intensified, particularly under the Trump administration, which has prioritized its development. Two companies at the forefront, Rigetti Computing Inc. and D-Wave Quantum Inc., have seen their stocks soar despite limited real-world applications and substantial cash burn. Over the past year, their stock prices have skyrocketed by more than 1,900%, driven by optimistic projections of the transformative potential of quantum technology. This remarkable rise has positioned them as some of the best performers in the stock market, outpacing even major players in the artificial intelligence sector like Palantir Technologies Inc. Both companies boast market capitalizations exceeding $10 billion, overshadowing well-established brands like Campbell’s Soup Company, despite generating less than 1% of its revenue.
In the speculative world of quantum computing, the debate is fierce. Advocates believe that the technology, which promises to generate vastly more powerful computing capabilities than conventional systems, will eventually yield significant breakthroughs in areas such as disease treatment and climate action. However, skeptics argue that the current surge in stock prices reflects a speculative bubble, buoyed by lofty aspirations rather than concrete financial fundamentals. Analyst Troy Jensen from Cantor Fitzgerald captures this sentiment: “If it works, it’s going to be huge and explosive. If not, it could go to zero.”
Investors are often willing to gamble on high-risk sectors, reminiscent of the biotechnology industry where potential drug development can take years. In the case of quantum computing, the theoretical nature of its advancements raises additional uncertainties. NVIDIA CEO Jensen Huang noted that practical outcomes may take decades to materialize, further complicating investment strategies in this blossoming field.
Amid this speculative rush, the interest in quantum computing has not waned. Fidelity International recently participated in a funding round that valued the startup Quantinuum at $10 billion. The allure of quantum computers lies in their ability to perform calculations in parallel, as opposed to the sequential processing of traditional computers. For instance, Google has reported that a quantum chip it developed could solve complex problems in minutes that would otherwise take supercomputers tens of septillion years.
Despite the captivating possibilities, concerns over a potential bubble remain palpable. Some analysts, such as Bruce Cox from the Harrington Alpha Fund, are betting against companies like Rigetti, citing a lack of earnings and a speculative atmosphere. “The froth is crazy,” he remarked, while David Williams from Benchmark faced backlash for raising Rigetti’s stock price target from $20 to $50.
Recent price movements suggest that some of these bubbles may be deflating. Both Rigetti and D-Wave have seen their stock prices drop over 34% from their peak just last month, wiping out around $12 billion in combined market value. Rigetti, for instance, is projected to generate approximately $20 million in revenue in the coming four quarters primarily from development contracts. At its recent stock price, Rigetti trades at more than 500 times its estimated sales—a stark contrast to a company like Palantir, which trades at about 72 times forward revenue.
While analysts maintain a generally optimistic outlook, with a significant majority rating Rigetti and D-Wave as buys, there exists skepticism about the sustainability of these valuations. The manifestation of a broad market selloff could influence the quantum sector, imposing further volatility as it continues to navigate its uncertain trajectory.
