Important points
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The Trump administration is reportedly discussing stock acquisitions with quantum computing firms D-Wave, IonQ, and Rigetti in exchange for federal funding.
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According to Grand View Research, businesses are expected to spend 600 times more on cloud computing than quantum computing by 2030.
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D-Wave, IonQ, and Rigetti have each spent significantly more than their earnings this past year, and their stocks are trading at notably high valuations.
The Trump administration has already invested in stocks from Intel and several minerals companies, recently shifting its focus to quantum computing. Reports suggest that the Department of Commerce is engaging with D-Wave Quantum, IonQ, and Rigetti Computing, with funding exchange for stock positions, as noted by a financial paper.
Should I invest in stocks?
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Quantum computing’s mainstream application may be quite far off
While quantum computers might not speed up regular tasks, they excel at solving complex problems that classical computers find extremely challenging. This includes optimizations in areas like drug discovery and finance.
Yet, we’re still in an experimental phase with quantum computing. Most organizations won’t realize much benefit from today’s tech. The current systems are not only expensive but also difficult to scale, often hindered by high error rates. Sundar Pichai, CEO of Alphabet, mentioned that it could take around five to ten years for the technology to be commercialized, likening the current state to early artificial intelligence developments.
Nvidia’s CEO, Jensen Huang, echoed these sentiments, suggesting that a useful quantum computer could still be two decades away. Notably, Grand View Research indicates that the quantum computing sector may hit $2.4 trillion by 2030, but that amount dwarfs the projected $4 billion for quantum computing compared to cloud computing.
The evaluation of the quantum computing industry appears high
D-Wave, IonQ, and Rigetti are currently unprofitable. Over the past year, the first two companies expended double their revenue, while Rigetti used six times more cash than earned. Their stock evaluations are also eye-catching. Each company’s share price reflects astronomical price-to-sales ratios that don’t align with future sales growth expectations.
- D-Wave Quantum is trading at a staggering 500 times its sales, with expected sales growth projected at 57% annually, reaching $109 million in 2028. That could still leave the stock trading at 103 times sales if its price stays unchanged.
- IonQ’s stocks are priced at 340 times sales, with walls predicting 90% annual growth leading to $492 million in 2028. If that comes true, it still could be at 36 times sales by that point.
- Rigetti Computing is priced at 1,590 times sales, with anticipated growth projected similarly to IonQ. Even at an expected $75 million in 2028, it could still be at 168 times sales if prices don’t increase.
In comparison to the S&P 500, where D-Wave, IonQ, and Rigetti’s valuations look unsustainable even if stock prices don’t change. This evaluation hinges on whether these companies can meet Wall Street’s lofty expectations.
Better buying chances are likely ahead
While quantum computing holds transformative potential, mainstream applications remain years away, and rising valuations across the field put D-Wave, IonQ, and Rigetti’s futures at risk. As it stands, stock prices might climb further, especially with government interest, but a significant market drop is probably on the horizon.
Interestingly, Nvidia thrives in the modern AI market, yet has seen its stock price dip over 50% three times in the last fifteen years. Looking back, those crashes offered great purchasing opportunities. So, investors aiming for exposure to quantum computing might find themselves waiting for similar chances with D-Wave, IonQ, or Rigetti.
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