Quantum Computing Gains Traction: Should Investors Join the Trend?

Technology stocks continue to attract investors, primarily driven by significant advancements in artificial intelligence (AI). In this landscape, semiconductor companies like Nvidia, Advanced Micro Devices, and Broadcom stand out. They provide essential components such as graphics processing units (GPUs) and networking gear for data centers, which are crucial for the practical application of generative AI.

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Investors have tended to favor chip stocks, but a new trend is beginning to emerge: quantum computing. Recent months have shown noticeable gains in quantum computing stocks, capturing the attention of investors seeking new opportunities.

Quantum Computing: A New Frontier

In simple terms, quantum computing uses principles of quantum mechanics to perform complex calculations beyond the capabilities of traditional computers. This technology is believed to enhance fields such as machine learning and tackle difficult problems that current systems can’t resolve.

Prominent stocks making headlines in this space include IonQ (NYSE: IONQ), Quantum Computing (NASDAQ: QUBT), and Rigetti Computing (NASDAQ: RGTI).

These companies have formed partnerships with major tech players like Nvidia, Amazon, Alphabet, Microsoft, and government entities, including NASA and prominent healthcare institutions like Johns Hopkins.

Image source: Getty Images.

Recent Stock Movements in Quantum Computing

The following chart shows stock price changes for IonQ, Quantum Computing, and Rigetti Computing throughout 2024. While these stocks have gained popularity, it’s important to consider the broader context before getting too excited about rapid price increases.

IONQ data by YCharts

Notice that during most of 2024, the prices of these stocks remained stable. It wasn’t until around October and November that they began to rise significantly. What sparked this change?

Evaluating the Stock Movements

As a long-term investor, I prefer stocks with consistent gains rather than those that exhibit unpredictable fluctuations. In my experience, major price shifts typically relate to a few scenarios.

For instance, if a biotech firm receives FDA approval for a groundbreaking drug, it can justify a surge in stock value. Similarly, setbacks in clinical trials can result in declines. However, the current rise of quantum computing stocks does not fit this pattern.

While no single cause can explain the upward trend, several factors appear to influence these prices. You may recall the unexpected rise of GameStop shares in 2020, which was largely driven by a short squeeze fueled by interest from the Reddit community r/wallstreetbets. Even today, that platform continues to be a source of chatter about speculative stocks.

Recently, IonQ, Rigetti, and Quantum Computing have gained significant mentions on Reddit. A post titled “My 100x companies” garnered over 400 responses, with IonQ topping the list.

Meanwhile, notable advancements in quantum technology from major corporations have attracted more attention. Google reported a significant breakthrough with its new quantum Willow chip, and IonQ revealed testing on Nvidia’s CUDA-Q quantum software.

These developments occurred in just the last two months, coinciding with increased interest and buying activity in these stocks.

Investment Considerations for 2025

Although IonQ, Quantum Computing, and Rigetti show promise, they have yet to achieve significant scalability, despite their collaboration with major tech and government entities. Currently, quantum computing has limited real-world applications, which is why it remains more of a theoretical rather than practical field.

Investors might be getting excited about quantum computing stocks based on hype rather than reality, viewing them as the “next big thing” in AI. Yet, their recent price trends resemble those of “meme stocks” more than solid investments.

There’s potential for continued momentum heading into 2025, but investing in these stocks might not be wise. For exposure to quantum computing, consider shares in established companies like Alphabet or IBM. Both are advancing in quantum tech without relying solely on it to achieve growth, unlike smaller companies that may face difficulties if their initiatives falter. Alphabet and IBM continue to thrive in various sectors, including advertising and cloud computing.

A Second Chance at Investment Opportunities

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Currently, we’re issuing “Double Down” alerts for three exceptional companies, and you may not want to miss out.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 30, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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