Nvidia's stock is up nearly 22,000% over the past 10 years, and up 46,000% over the past 15. It's easy to see why investors would now want to get in near the ground floor of other stocks whose transformational potential could deliver big gains over the long run.
Identifying those is much easier said than done. Nonetheless, Mizuho analyst Vijay Rakesh pointed to "exponential opportunities" with quantum-computing technology, and he recommended a few plays on the trend "as investors look for the next [Nvidia]."
That said, the ambiguous promises of large-scale quantum computing are still years away, and the near-term revenue opportunity for quantum computing "could be lumpy" since the technology is mostly still in the research-and-development phase.
Rakesh launched coverage of IonQ $(IONQ)$, Rigetti Computing (RGTI) and D-Wave Quantum (QBTS) with outperform ratings in a Thursday note that deemed quantum "The Next Big Compute Revolution."
D-Wave and Rigetti shares have both booked gains in excess of 2,000% over the past two years, while IonQ's stock has risen about 240%. Those moves have largely been driven by hype and momentum, rather than their financial potential in the here and now.
Altogether, revenue for IonQ, Rigetti and D-Wave is tracking to perhaps just $140 million this year, Rakesh said. Meanwhile, D-Wave and Rigetti have market capitalizations north of $8 billion, and IonQ is worth more than $17 billion.
But Rakesh pointed to "major historical computing paradigms" where a technology's growth took off in the decade after that industry reached a revenue run-rate of $1 billion to $2 billion. Quantum computing could be a $205 billion market a decade from now, he said.
He expects the companies to together deliver about $5 billion in revenue by 2030, which would represent 36% of the $15 billion total addressable market for quantum computing that he is modeling by then. By 2040, quantum companies could come to command a 16% share of the total compute-market opportunity.
Work and research in quantum computing has been decades in the making, Rakesh noted, but the technology is scaling today as the industry reaches more than 1,000 error-corrected logical qubits, which he said will drive adoption. Qubits are the units of information used in quantum computing that are not binary - like the 0s and 1s used in classical computing - allowing for multiple simultaneous calculations.
As qubits exist in a delicate environment, error correction is needed to protect the information from noise that would cause qubits to lose their quantum state.
Rakesh's price target of $90 for IonQ represents 74% upside to the stock's closing price of $51.67 on Wednesday. In his view, IonQ is "a leader" in the industry due to low error rates with its trapped-ions approach to quantum computing. He also flagged the company's "higher coherence times," meaning that its quantum system can stay in its quantum state longer.
That could give IonQ an advantage in ramping commercial uses faster than competitors, he said. The company offers a full-stack solution that includes networking and sensing. He sees IonQ eventually making up about 16% of the quantum-compute market in the long term.
Rakesh's $50 price target for Rigetti represents upside of 91% from the stock's $26.12 Wednesday closing price. Rigetti has the potential to scale with its qubit targets for next year and 2027, Rakesh said, while meeting 99.8% two-qubit gate fidelity, which is a measure of how close the outcome of a quantum computer's two-qubit gate operation is to the ideal solution.
The company's more than $450 million in cash, equivalents and investments "could be sufficient to operate" through at least 2030, Rakesh said. In his view, Rigetti's superconducting approach to quantum computing puts it close to industry peers International Business Machines and Google $(GOOGL)$ $(GOOG)$. In the long term, Rigetti could take a 10% share of the quantum-compute market.
Meanwhile, the $46 price target Rakesh has for D-Wave represents about 71% upside from the stock's Wednesday closing price of $26.80. D-Wave "is the undisputed quantum annealing leader," he said, referring to a technique in the industry that focuses on finding a quantum system's lowest energy state to fix problems with optimization. Rakesh said D-Wave could make up 10% of the market over time.
Quantum computing "promises a major transformation in high performance computing," Rakesh said, following general-purpose computing and then parallel computing, which have been enabled by central processing units and graphics-processing units. The technology "can drive exponential" improvement of more than 10,000 times the performance of classical and parallel computing, he said, pointing to problems in areas such as cryptography and machine learning that current computers can't solve.