Everyone would love to find the next Nvidia (NVDA +1.19%), the type of stock that generates life-changing returns. The problem is, that's far from easy, and aiming for gains that are in the thousands of percentage points can often mean trying to get in early. Doing so involves taking on considerable risk.
One area investors have been piling money into aggressively over the past year has been stocks involved with quantum computing. Amid a flurry of spending on artificial intelligence and the need for more advanced computing capabilities, many stocks related to quantum computing have been taking off. Here's a look at some of the hottest stocks in this area of tech, and whether one of them has the potential to be the next Nvidia.
NASDAQ: NVDA
Key Data Points
These stocks are up over 500% in just six months
Shares of Rigetti Computing, D-Wave Quantum, and Quantum Computing are all up staggering amounts in the past six months. While Nvidia has been falling, these stocks have been skyrocketing.
Rigetti doesn't have "quantum" in its name, but it's involved in building quantum computing systems. The key thing about quantum computing is that it can speed up processing times drastically and lead to faster solutions, thus significantly enhancing the capabilities not just for tech, but many other industries as well. The potential is enormous, but the market is still in its infancy.
According to analysts at Grand View Research, the quantum computing market probably will expand at a compound annual growth rate of more than 20% until 2030. Even by then, it will still be worth just over $4.2 billion.
What investors may find appealing about these stocks is that with so much potential still out there, their valuations may appear modest. Rigetti is the most valuable of the stocks listed here, but its market cap sits at around $2.7 billion. Nvidia, by comparison, is worth $2.8 trillion.
Why investors should be careful with quantum computing stocks
These stocks have been scorching-hot buys over the past several months, but none of them are profitable. These companies are still in their early growth stages, and it may be years before they hit breakeven, assuming they will at all.
RGTI Revenue (Quarterly) data by YCharts.
Some analysts believe that quantum computers that can solve real-world problems may be just five years away. But others believe it could take much longer. The big concern for investors is whether these companies will still be around by then. Regardless of whether they have "quantum" in their names or how optimistic they may be about the future, investors should tread carefully with these types of high-risk investments.
It's far too early to call any of these stocks the next Nvidia
Quantum computing may be the future for tech, but that doesn't mean any company involved in that area of tech will generate Nvidia-type returns for investors. Although Nvidia has skyrocketed in value over the past 10 years, it was already a well-known tech company back then. It wasn't nearly as risky a decade ago as these quantum computing stocks are today.
Investors who want exposure to quantum computing may simply want to invest in one of the top tech stocks in the market these days, as they may provide investors with the best mix of risk and growth opportunities. Nvidia itself is investing into quantum computing.
Putting a lot of money down on stocks that may not be around in five or 10 years, or whenever quantum computing becomes commonplace, is a highly risky position to take, and one that can lead to significant losses.
Trying to gamble on what may be the next big tech stock could lead to big returns, but it's much more likely to result in large losses. A safer option may be to invest in a more established tech company, such as Nvidia or another business that will benefit from quantum computing in the long run.
