Quantum computing stocks went on a roller-coaster ride last month as the high-flying emerging technology sector reacted to commentary from top tech leaders and others in the industry.
Quantum stocks had soared in December after Alphabet reported that it had accomplished a new milestone with its Willow quantum chip, but after that surge, some skeptical comments from Nvidia CEO Jensen Huang and others took some of the air out of the rally.
As a result, top quantum computing stocks like Rigetti Computing (RGTI +3.56%), D-Wave Quantum (QBTS +2.50%), and Quantum Computing (QUBT +0.40%) all fell double digits last month. According to data from S&P Global Market Intelligence, Rigetti lost 14%, D-Wave Quantum was down 29%, and Quantum Computing had given up 37%.
As you can see from the chart below, those three stocks all fell sharply during the week of the CES conference as the comments mentioned above come out.
Quantum stocks hit a wall
Investors should understand that these three quantum computing companies are very much in the development stage, and have minimal revenue right now.
Right now, the industry is moving in unison as investors see all three of these stocks as a way to get exposure to quantum computing and right now aren't differentiating much between them.
The challenges last month started when Nvidia CEO Jensen Huang said at CES that quantum computing was further away than investors had hoped, saying 15 to 30 years was a reasonable range for "very useful quantum computers" and that 20 years seemed like the consensus estimate.
The stocks plunged on Jan. 8 as that news came out, and fell again on similar comments from Meta Platforms CEO Mark Zuckerberg the following Monday as Zuckerberg said his understanding of quantum computing was that it was a "decade-plus out."
NASDAQ: RGTI
Key Data Points
The sector then swung back the following day after D-Wave Quantum CEO Alan Baratz said he "strongly disagreed" with Huang's assertion and noted that there are different approaches to quantum.
The following day, D-Wave Quantum said it had formed a new distribution partnership with Carahsoft Technology and Quantum Computing said it would collaborate with Sanders TDI, a biotech research institute, to research computational biomedicine. Both items show that interest seems to be building in quantum computing.
On Jan. 16, short-seller Capybara Research announced a short position in Quantum Computing, calling it a "rampant fraud" and alleging that it faked sales and partnerships.
The stocks rose toward the end of the month as D-Wave Quantum announced its new Leap Quantum LaunchPad program, which is designed to speed up the deployment of quantum computing applications.
Finally, the sector also got some good news to close out the month from Needham, which raised its price targets on D-Wave Quantum to $8.50 and to $17 on Rigetti Computing and maintained a buy rating on both stocks. Needham cited a number of factors indicating momentum building in the quantum computing sector.
Image source: Getty Images.
What's next for quantum computing stocks
Of the three stocks above, Rigetti and D-Wave look significantly ahead of Quantum Computing. Over the last four quarters, Rigetti has brought in $11.9 million in revenue while D-Wave Quantum has generated $9.4 million in revenue. Quantum Computing, on the other hand, has made just $386,000 in revenue.
All three stocks are also losing money and now trade at sky-high valuations following the boom in quantum computing in December. The price-to-sales ratios for all three are above 100, and they all have market caps above $1 billion despite generating minimal revenue.
Clearly, investors have high expectations for the sector, but according to current results, these quantum computing stocks still aren't generating significant revenue and aren't growing particularly fast.
While the sector does have disruptive potential, at this point a wait-and-see approach looks sensible given the lofty valuations and little in the way of fundamentals to back them up.
