U.S. stocks are in a tough spot. Volatility is way up, while momentum across the major stock indexes has reversed course since the start of the year. To wit, the benchmark S&P 500 has lost more than 10% of its value this year, and the formerly red-hot Nasdaq-100 has lost even more, with the index dropping by a whopping 13% at the time of this writing.
However, if you have at least 10 years to retirement, this marketwide retracement could be an excellent time to load up on high-quality growth stocks. For instance, I'm right about 11 years from retirement and still buying shares of three innovative growth stocks with tremendous upside potential. Read on to find out more about these game-changing innovators.
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Quantum computing pioneer
D-Wave Quantum Inc. (QBTS 26.16%) is pioneering the commercial application of quantum computing technology. The company has developed quantum annealing systems designed to solve complex optimization problems that are practically impossible for traditional computers to handle. Unlike other quantum companies still in the research phase, D-Wave already has working quantum computers with real-world applications in industries ranging from logistics and healthcare to financial services and materials science.
Despite this technological leadership, D-Wave's stock has plunged 24% year to date, creating what appears to be a compelling entry point for investors with patience. At just $1.76 billion in market capitalization, the company trades at a fraction of its potential value in a quantum computing market projected to reach $850 billion by 2040, according to Boston Consulting Group. D-Wave's first-mover advantage in quantum annealing gives it a strategic foothold in what could become one of the most transformative technologies of our lifetime.
I'm accumulating shares because D-Wave offers rare exposure to quantum computing with actual commercial deployments today, not merely research papers and promises. That said, I'm maintaining discipline by keeping this position relatively small in my portfolio until the company's revenue growth and market adoption more fully validate its long-term potential. In quantum computing, being early is essential, but proper position sizing remains equally important.
Defense-grade intelligence
BigBear.ai Holdings, Inc. (BBAI -4.30%) brings military-grade artificial intelligence (AI) to government and enterprise clients. The company's analytics platform transforms overwhelming data volumes into actionable intelligence, automating complex decision processes where human analysts would otherwise be overwhelmed. Its solutions shine particularly in mission-critical environments where the stakes are highest, and the margin for error is smallest.
The market has brutally punished BigBear.ai stock, which has collapsed by 43% year to date, creating what appears to be a dramatic mispricing for this specialized AI player.
At a mere $690 million market capitalization, the company represents a microscopic fraction of the global AI market, projected to surpass $1.8 trillion by 2030, according to Grand View Research. BigBear.ai's established foothold with defense and intelligence agencies provides revenue visibility and a powerful validation of its technology that few AI start-ups can match.
I'm strategically accumulating shares because the company's focus on high-consequence, mission-critical AI applications creates inherently sticky client relationships with substantial barriers to entry. However, I'm exercising prudence by keeping this position relatively small within my portfolio, recognizing the inherent volatility in government contracting cycles and the competitive pressures in the broader AI landscape.
Space launch disruptor
Rocket Lab USA, Inc. (RKLB 0.27%) has firmly secured its position as America's second most active launch provider, behind only SpaceX. Unlike aspiring aerospace start-ups still perfecting their first rockets, Rocket Lab offers a comprehensive space ecosystem spanning reliable launch services, spacecraft manufacturing, and critical satellite components. The company's workhorse Electron rocket has already successfully delivered 224 satellites to orbit, while its ambitious Neutron vehicle under development promises to eventually support human spaceflight missions.
Despite these achievements, Rocket Lab shares have tumbled 22% year to date, creating what appears to be an exceptional entry point for investors seeking exposure to the commercial space revolution.
At $8.5 billion market capitalization, the company trades at approximately 1/20th of SpaceX's private market valuation (estimated at over $180 billion), yet Rocket Lab stands among a tiny elite group of companies with demonstrated orbital launch capabilities and flight heritage. The broader space economy, valued at $447 billion in 2023, is forecast to exceed $1 trillion by 2040, according to Morgan Stanley Research.
I'm building a substantial position in Rocket Lab because it represents that rare combination of proven technology, established revenue streams, and tremendous runway for growth as the space economy expands.
Unlike my more cautious approach with the previous two stocks, I believe Rocket Lab merits a meaningful 1% to 5% allocation within a diversified portfolio. The company's rapidly accelerating revenue, unique competitive positioning as the clear number two player behind SpaceX, and expanding capabilities across the space value chain create a compelling risk-reward profile that few public companies can match.
