Quantum computing investment is growing fast. According to MIT's inaugural Quantum Index Report, venture capital poured $1.6 billion into quantum computing firms in 2024 alone, while quantum computing stocks have exploded in value, reaching multi-billion-dollar market capitalizations.
Let's consider two of the most prominent: Quantum Computing Inc. (QUBT 1.75%) and D-Wave Quantum (QBTS +1.63%). Which is the better pick for those looking to invest in this potentially revolutionary technology?
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Quantum Computing is taking a multi-pronged approach
Let's start with what these companies actually do. While both are developing quantum computing technology, they each are taking a unique approach.
Quantum Computing develops a range of quantum-related technologies and products -- from software to hardware. The company employs an approach based on photonics, or light, and claims it can operate at room temperature. That's a big issue for quantum, as many approaches use superconductors that must be cooled to near absolute zero. To accomplish this, the company develops Thin-Film Lithium Niobate (TFLN) chip technology.
D-Wave is aiming for quantum as a service
D-Wave Quantum employs a different approach known as quantum annealing. This does require extreme cooling to temperatures "colder than interstellar space," but according to the company, it is a much more powerful approach that is less prone to errors than others. D-Wave has also adopted a service model, offering computing via a cloud platform.
NASDAQ: QUBT
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Financial reality of quantum
Quantum Computing and D-Wave, along with other companies in this field, have stirred investor enthusiasm about their technological capabilities, development timelines, and products that may not be realistic. Yet, this has led to some pretty wild valuations.
Despite only $8.8 million in sales last year and significant negative net income, D-Wave has a market capitalization of $6.3 billion. But at least D-Wave's sales are in the millions; Quantum Computing's $2.6 billion market cap is wildly out of step with its 2024 loss of nearly $70 million on just $373,000 in sales.
Quantum timeline reality
OK, you might be thinking, lots of companies start out with limited or no revenue, operating deep in the red as they develop a new technology or product. They launch the product and their top and bottom lines explode, justifying early investment at expensive valuations.
That model certainly can work, but I think most successful companies that take this approach are attempting to bring to market a technology that is much further along in its development. Quantum computing is really at the edge of human knowledge and ability. It's still more in the realm of pure science than it is in hard engineering.
Not only is there no guarantee that either of these companies will successfully develop true commercial quantum computing, but there's no guarantee anyone will. That's because it's not enough to create a fully operational quantum computer. It can't just work; it has to be useful -- more useful than classical computers, which are cheaper and more reliable.
NYSE: QBTS
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There is a great deal of hype and excitement surrounding the potential of this technology, which I believe is clouding investors' judgment. One recent MIT report concludes that the technology "remains far from meeting the requirements for running large-scale commercial applications." This appears to be a sentiment shared by many researchers in academia.
Better quantum computing stock: Alphabet
I am bullish on the industry and technology long term. I think we will successfully develop practical quantum computing, but I don't think it will be soon enough to justify the current multi-billion-dollar valuations of these stocks. So, to answer the question, which is the better pick? Neither.
Instead, I would point investors to Alphabet, Microsoft, or IBM, with Alphabet being my top pick. These companies have enormous resources in personnel and money to lead quantum development, and critically, they have massive cash flows from the rest of their very profitable businesses to sustain research and development for years or even decades.
