Quantum computing stocks aren't in style on Wall Street like they were three months ago. With questions circling the U.S. economy about how it will fare with tariffs, investors are looking for safer places to stash their money. As a result, many pure-play quantum computing stocks are down significantly from the all-time highs they set a few months ago.
That does give investors a chance to snatch them up for much lower prices than they could just a few months ago. But would that be a smart move?
Quantum computing pure plays have promise
The first decision investors must make when diving into the quantum computing realm is whether they want to purchase shares of an established tech company working in the field or a quantum computing start-up. Some of the established tech players that are also making significant investments in quantum computing are Alphabet, Microsoft, and Nvidia.
These types of companies have their place in a well-diversified portfolio, but investors looking to get to a million want to look to invest in something newer, which bigger potential for growth, since it is starting from a smaller place.
For exceptional returns, you might want to look at quantum computing pure plays like IonQ (IONQ 2.19%), D-Wave Quantum (QBTS 2.30%), and Rigetti Computing (RGTI 3.44%). These companies are still small enough that if one of them hits it big, it has plenty of room to grow a modest investment like $10,000 into $1 million.
For a public company to increase in size by 100 times isn't common. Each of these companies was valued at around a few billion as of Wednesday's market close, far from the multitrillion-dollar market caps of the biggest companies. So there's room to soar.
IONQ Market Cap data by YCharts
One of these companies' biggest hurdles is getting accurate answers from a quantum computer. Quantum computers don't transmit data in binary bits (a 0 or a 1). Quantum computing uses qubits, which can be expressed as the probability of an answer being a 0 or 1. This allows a single qubit to store a ton more information than a bit, which is what makes quantum computers more powerful.
However, qubits are sensitive to their environment and can thus be error-prone. The first company to get errors under control and scale its solution will potentially win the quantum computing race.
Quantum computing could be years away or right around the corner
In January, Nvidia CEO Jensen Huang made headlines when he predicted that commercially useful quantum computing was more than 15 years away. The CEOs of many of these start-ups responded that he was wrong, asserting that they had useful machines available today. Then in mid-March at Nvidia's GTC Conference, Huang shared a stage with these same CEOs, discussing the future of quantum computing and how quickly it will arrive in a practical way.
IonQ, D-Wave, and Rigetti already have some products available that are helping researchers in the field. IonQ holds the largest individual contract, with the Air Force Research Lab, which started off as a $54.5 million deal and then expanded by another $21.1 million recently.
NYSE: IONQ
Key Data Points
Earlier this year, D-Wave announced the sale of one of its machines -- a computer with more than 5,000 qubits -- to a company in Germany. Rigetti also has many partnerships, including some with banks that are trying to determine how quantum computing could benefit their businesses.
NYSE: QBTS
Key Data Points
These contracts and partnerships are vital for these quantum computing companies, as they lack the resources that some of their larger competitors have. It's part of the risk of these companies.
The $1 million question
So, could any of these stocks make an investor a millionaire? They could.
However, the chances of it happening appear extremely low, and investors would be wise to limit their portfolio's exposure to these start-ups. There's a real possibility that all of the quantum computing pure plays could lose to one of the established tech players, causing their stocks to go to zero.
I suggest investors keep their investments in these pure plays fairly small -- no more than 1% of their overall portfolio value. That way, you've still got a piece of a potentially massive winner, but you keep the downside to a minimum if it doesn't work out.
