Investors React as Quantum Computing Stocks Plunge After Industry Comments

Quantum computing stocks fell sharply on Wednesday as investor optimism about the sector faced a reality check.

For about a month, the market seemed excited about quantum stocks. This enthusiasm began after Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) introduced its advanced Willow quantum computing chip. This chip achieved record benchmarks, completing calculations in minutes that would take traditional supercomputers billions of years.

However, a remark from Nvidia (NASDAQ: NVDA) CEO Jensen Huang shifted the mood, leading to significant losses for quantum computing firms Rigetti Computing (NASDAQ: RGTI), Quantum Computing (NASDAQ: QUBT), and D-Wave Quantum (NYSE: QBTS). At their lowest points on Wednesday, these stocks fell by nearly 51%. By 3 p.m. ET, Rigetti was down 41%, Quantum Computing lost about 40%, and D-Wave Quantum was down approximately 30%.

Image source: Getty Images.

Huang’s Insight on Quantum Computing

Jensen Huang is seen as a leading figure in the tech and AI industries. His leadership has propelled Nvidia to a valuation exceeding $3 trillion, especially after the introduction of ChatGPT. The company’s graphics processing units (GPUs) and superchips have been integral to powering new generative AI applications, creating strong demand from cloud providers and other businesses.

Given his influential position, investors closely follow Huang’s statements. During a recent Q&A at CES in Las Vegas, he expressed that significant advances in quantum computing might take a long time. He suggested that it could be at least 15 to 30 years before quantum computers become truly impactful.

“If you said 20 years, I think many would agree that’s a reasonable timeline,” Huang commented.

The immediate decline in quantum stocks following his remarks illustrates the impact of sentiment in this sector. Following Alphabet’s Willow announcement, stocks surged largely on speculation and hype. With revenues low for these companies, their stocks represent bets on potential future profits rather than current performance.

For instance, before Wednesday, Rigetti Computing’s stock had skyrocketed nearly 2,000% in the past year, despite only reporting $2.4 million in revenue during the third quarter and incurring $18.6 million in operating expenses. This valuation exceeded $5 billion as of the previous day’s close.

Meanwhile, Quantum Computing had seen an increase of nearly 3,000% but reported even lower revenue of $101,000 in the third quarter. Their market cap was around $2.63 billion just before the sell-off.

D-Wave Quantum, which labels itself as the first commercial quantum computer supplier, reflected $1.9 million in revenue, down from the previous year. Their operating costs totaled $21.7 million in Q3, leaving them with $29.3 million in cash. They had gained over 1,000% in the past year before the sharp drop.

Potential Future Challenges for Quantum Stocks

Alphabet’s Willow announcement reflects more of a scientific achievement rather than a commercially viable solution. The company has identified only the second of six milestones in quantum computing, highlighting the long road ahead for practical applications. Furthermore, the Willow publicity seems designed for a scientific audience rather than investors.

Though Willow may stimulate renewed funding and excitement in quantum computing, Alphabet’s current leadership and resources position it well ahead of its competitors.

Investors eyeing quantum computing stocks should remain cautious. All three companies have meager revenues and fragile finances, suggesting immediate breakthroughs are unlikely.

The past day’s events illustrate how quickly market excitement can deflate when grounded in speculation, and these quantum stocks have shown to be overly driven by hype.

Until the quantum computing industry can provide tangible, monetizable opportunities, these stocks might be best left on the shelf, despite their potential appeal to investors.

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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Jeremy Bowman holds positions in Nvidia. The Motley Fool has positions in and recommends Alphabet and Nvidia. For more information, see our disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.