For three years, artificial intelligence (AI) has been the premier growth trend on Wall Street. Watching members of the "Magnificent Seven" devote tens of billions of dollars to AI infrastructure demonstrates what a game-changing technology it can be.
But a strong argument can be made that AI hasn't been the hottest technology trend in 2025. The evolution of quantum computing has sent pure-play stocks IonQ (IONQ +5.43%), Rigetti Computing (RGTI +5.18%), D-Wave Quantum (QBTS +4.56%), and Quantum Computing Inc. (QUBT +3.46%) higher by 123% to 2,090%, respectively, over the trailing year. These are potentially life-changing gains for early investors.
Quantum computing, which relies on specialized computers and the theories of quantum mechanics to solve complex problems that classical computers can't perform, has the potential to create up to $850 billion in global economic value by 2040. It can do this by speeding up the AI algorithm learning process, improving weather modeling, beefing up cybersecurity platforms, and improving the drug-development process by running molecular interaction simulations, among the many postulated use cases of quantum computers.
Image source: Getty Images.
Though sales growth estimates are climbing rapidly for quantum computing stocks, historical precedent, along with the black-and-white nature of corporate income statements, strongly suggests IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc. stocks are going to plunge 50%, or perhaps far more, in 2026.
Next-big-thing technologies need ample time to mature
While there's plenty of excitement and lofty expectations tied to the evolution of quantum computing, history serves as a warning for investors.
When the internet began going mainstream in the mid-1990s, we witnessed euphoria build within the investing community. However, it took years before businesses figured out how to properly optimize this technology and maximize their returns on investment. In other words, the internet took years to mature as a technology before for it became a foundational puzzle piece for corporate America.
For three decades, investors have consistently overestimated how quickly new technologies and hot trends would be adopted, utilized, and optimized on a broad scale by businesses and/or consumers. This occurred with the advent of the internet and was also observed with genome decoding, nanotechnology, 3D printing, blockchain technology, and the metaverse.
At the moment, quantum computing is a nascent technology. It's not being commercialized on a mainstream basis, and there isn't any evidence that businesses are profiting from their investments in this hyped trend. Quantum computing appears to be a textbook example of what hype looks like before the bubble bursts.
Quantum computing stocks are losing copious amounts of money
Given how early we are in the commercialization cycle of quantum computers, it should come as no surprise that IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc. are losing money hand over fist.
NYSE: IONQ
Key Data Points
IonQ, which is the largest pure-play quantum computing stock, delivered 222% sales growth to $39.9 million in the September-ended quarter, but saw its loss from operations balloon to $168.8 million from $53.1 million in the prior-year period. As for Rigetti Computing, its loss from operations grew to $20.5 million in the third quarter, up from $17.3 million in the comparable period from last year.
These companies spending more to commercialize their products and services, and continuing to improve the speed and efficiency of their quantum computers, is fully expected. But to keep the proverbial hamster on its wheel, it's going to require plenty of capital.
IonQ announced an equity offering in October for $2 billion, and it's highly likely that it and Rigetti, D-Wave, and Quantum Computing Inc. will turn to common stock/stock warrant offerings, or perhaps convertible debt, as a means to raise capital. These are all paths that can lead to dilution, which works against existing shareholders.
Image source: Getty Images.
Valuations for quantum computing stocks are historically unsustainable
Another reason IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc. stocks can plunge by 50% or more in 2026 is their respective valuations.
To be completely fair, there isn't a one-size-fits-all blueprint when it comes to evaluating and valuing stocks. The idiom of "one person's trash being another's treasure" holds true on Wall Street, where one pricey stock may be viewed as a bargain by another investor.
However, time-tested valuation metrics like the price-to-sales (P/S) ratio do a solid job of conveying just how far outside of historical norms quantum computing stock valuations are at the moment.
In the year leading up to the bursting of the dot-com bubble, companies that were leading the charge, such as Cisco Systems and Microsoft, peaked at P/S ratios in the neighborhood of 30 to 40. This P/S ratio range has served as a pretty consistent ceiling for public companies that are on the cutting edge of a hyped trend or game-changing technology for three decades.
NASDAQ: RGTI
Key Data Points
As of the closing bell on Nov. 10, the trailing-12-month P/S ratios for quantum computing pure-play stocks are as follows:
- IonQ: 172
- Rigetti Computing: 1,057
- D-Wave Quantum: 354
- Quantum Computing Inc.: 5,983
Even looking a few years down the road wouldn't remove any of these four companies from historical bubble territory.
The stock market is historically pricey, too
To round things out, the stock market, as a whole, is also historically pricey.
The S&P 500's (^GSPC +0.11%) Shiller Price-to-Earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio, or CAPE Ratio, is a valuation tool that's based on average inflation-adjusted earnings over the prior 10 years. Relying on a decade of earnings history provides the closest thing to an apples-to-apples valuation comparison investors can get with Wall Street's benchmark index, the S&P 500.
S&P 500 Shiller CAPE Ratio data by YCharts.
When back-tested to 1871, the Shiller P/E has averaged a multiple of 17.31. In late October, it peaked at 41.20, which is the highest multiple during the current bull market, and the second-highest earnings multiple during any continuous bull market since January 1871.
History tells us that when valuations become this extended to the upside, a 20% or greater move lower in the S&P 500 eventually awaits. If a drop of this magnitude does unfold, as history suggests, companies with premium valuations, such as IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc., will be among the hardest-hit stocks.
