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Why Shares of Arqit Quantum Were Up Nearly 11% Today

By Nicholas Rossolillo – Sep 29, 2021 at 5:58PM

Key Points

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The recent SPAC merger is solving a security problem of the future... now.

What happened

Shares of next-gen encryption-software trailblazer Arqit Quantum (ARQQ -4.19%) were up 10.9% as of market close today, according to data provided by S&P Global Market Intelligence. Arqit, which just went public via a SPAC merger at the start of September, is currently double the price it was when it made its publicly traded debut, but is half its peak valuation in mid-September. Suffice it to say, this has been a wild ride higher for shareholders who bought in early.  

So what

Arqit currently boasts a market cap of over $2.3 billion, a sizable valuation for a fresh software business like this. As the name implies, this stock is a bet on the nascent quantum-computing industry.

The mind-bending technology that taps quantum physics to accelerate computing speed still has a very long way to go before widespread commercialization. But quantum computing has made some strides this year. For example, IonQ is working to build a network of quantum computers and is about to merge with SPAC dMY Technology Group III (DMYI). Honeywell (HON) also recently announced it will spin off its Quantum Solutions segment and merge it with software company Cambridge Quantum Computing.

Someone working on the equipment inside a data center.

Image source: Getty Images.

We're still a long way from quantum computers disrupting the status quo in the tech industry, but if and when it does, these advanced computers could force a reworking of cybersecurity services. That's where Arqit's product comes in.

Arqit has developed what it calls the QuantumCloud encryption service, built to protect data and digital assets (including cryptocurrencies like Bitcoin and other blockchain-based assets) on the internet from the threat a quantum-based cyber attack might pose one day.  

Now what

It's not just protection from a sci-fi-sounding future that has some investors excited about Arqit stock. The company says it's working with a few dozen multinational companies and government agencies, with $130 million in revenue under contract and an additional pipeline of $1.1 billion. 

However, new SPAC IPOs like this sometimes get hot after going public, only to quickly come back down to reality. With minimal actual sales to speak of right now, Arqit Quantum's current valuation assumes its lofty projections over the coming years transpire.

Don't rush in on the hype. But if quantum computing interests you, this is a rare pure-play stock in this futuristic industry to keep tabs on.

Nicholas Rossolillo owns shares of Bitcoin. His clients may own shares of the companies or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

Stocks Mentioned

Arqit Quantum Inc. Stock Quote
Arqit Quantum Inc.
ARQQ
$7.31 (-4.19%) $0.32
Bitcoin Stock Quote
Bitcoin
BTC
$16,974.80 (-0.71%) $-121.95
dMY Technology Group, Inc. III Stock Quote
dMY Technology Group, Inc. III
DMYI
Honeywell, Inc. Stock Quote
Honeywell, Inc.
HON

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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