Quantum Computing Overview

Quantum computing, a fascinating branch of computer science, aims to change the game by utilizing qubits instead of traditional bits. While bits can only exist in one of two states, qubits can be in multiple states simultaneously. It’s a complex field, but if it can be successfully developed, it has the potential to address problems that current computers would take an eternity to solve, essentially reshaping the economy.

Google’s parent company, Alphabet, is hopeful that we could see usable quantum computing applications in about five years, though it might take a few decades for the technology to become widespread.

This hasn’t deterred early players like Rigetti Computing and D-Wave Quantum from diving into opportunities. Even if you feel it may be premature to invest, there are a few reasons why keeping an eye on these stocks could be worthwhile.

Rigetti Computing

It’s often said that “a rising tide lifts all boats.” Rigetti Computing, with its stock skyrocketing by 156% this year, is certainly drawing attention. The company’s appeal lies in its unique business model and vertical integration. However, there are concerns about government support and what that might mean for future investors.

Instead of generating revenue directly from quantum computing, Rigetti focuses on providing the infrastructure that allows other companies to leverage this technology—much like what Nvidia does with chips for the AI sector.

Unlike Nvidia, which relies heavily on design and marketing, Rigetti builds its own chips at its Fremont, California facility. This approach gives them more control over their supply chain and diminishes their reliance on foreign partners as they work with sensitive technology.

Interestingly, the U.S. government’s interest in quantum computing, seen as a strategic asset against rivals like China, has directed attention towards Rigetti. In October, there were statements about not contemplating investments in Rigetti or similar quantum stocks, but they have received support, such as an $8.6 million grant from DARPA in 2020.

D-Wave Quantum

If Rigetti’s performance has been notable, D-Wave Quantum’s results are even more striking. The stock has surged by 293% this year, with a massive 3,200% increase over the past twelve months. While some of this can be attributed to the industry buzz, D-Wave has also had significant developments specific to the company.

D-Wave isn’t following the general-purpose path; instead, they specialize in optimization through quantum annealing, a technology aimed at finding the least-energy solutions to various problems. This method has practical applications in areas like logistics, where businesses seek the most cost-effective delivery routes, and even in generative AI, thereby enhancing large language model training.

They’ve made headway by selling their Advantage quantum annealing device to research institutions and have begun commercializing this technology. Recent financial reports indicate that second quarter revenue rose to $3.1 million, reflecting a 42% increase from the previous year. Still, it’s a speculative venture; D-Wave is not expected to turn a profit in the near future, with operating losses hitting $26.5 million and widespread commercial viability likely years away.

Is it too early to invest in quantum computing?

With both Rigetti Computing and D-Wave Quantum showing promising entry points into the quantum computing sector, it might be wise for investors not to rush into purchases. It could be a significant amount of time before this technology gains commercial viability. Meanwhile, both companies are investing heavily in research to maintain a competitive edge.

Additionally, considering the long-term challenges they face, the price-to-sales ratios for Rigetti and D-Wave are quite high, at 1,110 and 335 respectively, which might not reflect the potential risks ahead.