Rigetti Computing Inc. and D-Wave Quantum Inc. Inc. have gained more than 1,900% over the past 12 months despite having few real-world applications and not being expected to generate significant revenue for years. Investors are betting that the technology they’re developing will be the next big thing.
The rally has placed them among the best performers in the stock market, dwarfing the returns of popular artificial intelligence plays like Palantir Technologies Inc. With market capitalizations that exceed $10 billion, the companies are more valuable than soup maker Campbell’s Co., even though they have less than 1% of the revenue.
Welcome to the world of quantum computing investing, which inhabits one of the most speculative and fiercely debated corners of the stock market. The companies are chasing a new kind of computer, exponentially more powerful than conventional machines.
For bulls, it’s only a matter of time until breakthroughs enable computing so powerful that the technology will transform the world by helping cure diseases and fighting climate change. Skeptics, meanwhile, see a momentum-fueled bubble based on hopes and dreams that’s destined to pop when the focus inevitably returns to fundamentals.
「If it works, it’s going to be huge and explosive,」 said Troy Jensen, an analyst at Cantor Fitzgerald, who covers a handful of quantum computing stocks, including Rigetti and D-Wave. 「If not, it could go to zero.」
The all-or-nothing nature of the trade has drawn comparisons to another group of stocks long synonymous with binary bets: biotechnology. In that sector, investors are willing to wait years on risky stock bets that drug development pipelines will eventually yield big payoffs.
The key difference from quantum technology lies in its theoretical nature. Almost everyone agrees that this technology has great potential, but no one can determine when it will truly be realized.
NVIDIA's CEO Jensen Huang sparked a lot of discussion earlier this year when he said that such results might not occur for several decades.
Captivating Potential
Still, there’s no shortage of interest in the field. The Trump administration has made quantum computing development a priority. Just this week, Fidelity International participated in a funding round for Quantinuum valuing the startup at $10 billion.
Quantum computers make calculations in parallel, rather than sequentially, as traditional computers do. That makes them able to process exponentially more information. Last year, Google announced that a quantum-computing chip it developed solved a problem in five minutes that would have taken a supercomputer 10 septillion years.
The potential applications have captivated investors, who have watched AI-related stocks soar over the past two years and are intent on getting in early on the next disruptive technology — even if it means buying stocks that are impossible to value based on traditional financial metrics.
「Quantum is going to leap-frog everything,」 said Haim Israel, head of the global thematic research team at Bank of America Merrill Lynch, who compares what’s going on in the industry now with the early days at ChatGPT owner OpenAI. 「Capital markets don’t want to miss this moment.」
With such grand visions of a quantum computing future, it’s little surprise so many investors have jumped on the speculative bandwagon in the era of meme stocks and AI euphoria. Even tech giants like Alphabet Inc. are benefiting from the enthusiasm. An Oct. 22 report detailing a breakthrough for its Willow quantum-computing chip sent the stock up 1% in a matter of minutes, briefly adding about $30 billion in market value.
Bubble Worries
According to Bruce Cox, who runs the Harrington Alpha Fund and is betting against Rigetti shares, the significant increase in stock prices without corresponding revenue support is a clear sign of a market bubble.
「There are no earnings, nothing to go on,」 said Cox. 「The froth is crazy.」
David Williams, an analyst with Benchmark, said that when he raised his price target on Rigetti to $50 from $20 last month, it drew more 「hate mail」 than any time in his more than 14 years on Wall Street. The stock closed at $33.77 on Friday.
If there is a bubble, the popping may already be underway. Rigetti and D-Wave have each fallen more than 34% from records notched last month, erasing about $12 billion in combined market value.
For the pure-play quantum companies, a lot has to go right to justify the current valuations, some of which make stocks like Palantir, the most expensive in the S&P 500, look downright cheap.
Take Rigetti. The Berkeley, California-based company is expected to generate revenue of about $20 million over the next four quarters, mostly from development contracts and sales of quantum processors. At current levels, it’s priced at more than 500 times estimated sales. Palantir, by contrast, trades at 72 times forward revenue and the Nasdaq 100 is priced at less than 6 times.
At Rigetti’s current stock price, the company would need annual revenue of more than $600 million to have a valuation similar to AI chipmaker Nvidia, which is priced at 17 times projected sales. That’s far in excess of the $40 million anticipated in 2027, according to the average of analyst estimates compiled by Bloomberg.
Rigetti and D-Wave didn’t respond to requests for comment.
If there is any fear about the recent quantum stock selloff, it isn’t evident in analyst ratings. Of the seven analysts tracked by Bloomberg that cover Rigetti, six have buy equivalent ratings and only one is neutral. All ten analysts covering D-Wave recommend buying the stock.
Benchmark’s Williams is one of the staunch optimists in the market. He firmly believes that the prospects of the quantum computing market are gradually becoming clearer, and he is full of confidence in this process.
However, he admits that the rise in the stock market is to some extent driven by retail investors and those who chase market trends. Moreover, given the long time span required for quantum computing to take effect, fluctuations are to be expected.
「Quantum’s not going to escape a broader market selloff.」