Why Some Quantum Computing Stocks Soared Last Month (While Others Slumped)

Quantum computing stocks displayed a mixed performance last month, with some soaring while others experienced declines. Understanding these fluctuations can impact your investment strategy in this fast-evolving computing sector.

Last month was notable for quantum computing stocks. According to data from S&P Global Market Intelligence, D-Wave Quantum (QBTS 2.56%) saw a remarkable increase of 38.7%, and Quantum Computing (QUBT 5.16%) rose by 31.9%. In contrast, shares of Rigetti Computing (RGTI 13.19%) fell 6.4%, while IonQ (IONQ 11.06%) dropped by 10.2%.

March was indeed eventful:

• Three of these companies reported earnings data.
• There was a significant industry conference that had implications for the market.
• D-Wave made a notable announcement about its technology advancements.

D-Wave's breakthrough versus disappointing financials

Starting with the biggest gainer, on March 12, D-Wave claimed it had successfully utilized its annealing quantum systems to tackle a complex real-world problem. The company's public relations team emphasized this milestone, mentioning a "landmark" paper that purportedly offers solid validation for this groundbreaking achievement.

The very next day, D-Wave reported its earnings, revealing that sales remained flat year-over-year. However, net losses under generally accepted accounting principles (GAAP) improved from $0.60 to $0.15 per share.

The combination of D-Wave's technological breakthrough and manageable financial results led investors to react positively, resulting in a staggering 92% surge in stock price within three days, which also uplifted other stocks in the industry.

On the flip side, Rigetti and Quantum Computing reported quarterly financial results that significantly missed analyst expectations. Rigetti’s fourth-quarter sales plummeted by 33% year-over-year, with net losses escalating from $0.09 to $0.68 per share. Meanwhile, Quantum Computing reported a 17% decline in revenues alongside a 35% rise in operating expenses, leading to increased losses from $0.09 to $0.47 per share during the same period.

Interestingly, the timing of Quantum Computing's earnings report was overshadowed by Nvidia, which hosted a "quantum day" at the GTC technology conference. During this event, CEO Jensen Huang acknowledged his previous assessment of the quantum computing industry, which suggested practical applications would emerge in about 20 years.

Investors seemed skeptical about this acknowledgment, leaving many quantum stocks in a state of unusual volatility around March 20.

The industry's challenges and future potential

D-Wave's recent claim of achieving "quantum supremacy" may have temporarily boosted optimism within the sector, similar to the hype that Alphabet generated with its error-correcting announcement in late 2024. However, the legitimacy of D-Wave's claims became subject to scrutiny, as the prestigious publication Scientific American pointed out that researchers had largely countered D-Wave's assertions during the peer-review phase in March 2024.

The process of simulating complex magnetic materials, which would traditionally take a digital computer millions of years, was reportedly accomplished in just two hours using a new algorithm on a conventional laptop.

As such, it wasn't shocking to observe that some of the initial price gains began to diminish. Nevertheless, investors remain hopeful, as all four notable quantum computing companies have seen their stock values triple over the past six months. While IonQ stands as a sector leader with a more stable outlook compared to its smaller counterparts, its stock performance is still influenced by speculative market trends rather than concrete advancements.

In summary, the quantum computing sector has witnessed significant hype since Alphabet's announcement regarding Willow. Moving forward, stocks in this space are likely to face downward trends as the current speculative bubble deflates.

Quantum computing holds the potential to revolutionize numerous industries and fundamentally alter our understanding of computing systems in the long run, but it remains premature to identify potential long-term leaders in this competitive landscape. Investors should approach their investments in pure-play quantum computing cautiously, ensuring that they can accept the possibility of substantial losses.

Alternatively, considering investments in established technology giants like Alphabet and Nvidia might be a wise choice. These companies are heavily invested in quantum computing research, allowing for an indirect exposure to the potential of this burgeoning field, while still benefiting from the overall strength and reliability of leading tech businesses.

Quantum, Investing, Stocks