Why Quantum Computing Stocks Fell in January: A Closer Look at Rigetti, D-Wave, and Quantum Computing

In January, quantum computing stocks experienced a significant downturn, leading to double-digit losses for companies like Rigetti Computing, D-Wave Quantum, and Quantum Computing. This decline followed a period of enthusiasm in December, when advancements from major tech player Alphabet gave a boost to the sector.

The excitement began when Alphabet announced a breakthrough with its Willow quantum chip. As a result, quantum stocks saw impressive gains in December. However, this momentum was quickly challenged in January when skeptical remarks emerged from industry leaders.

Notably, Nvidia CEO Jensen Huang stated during the CES conference that achieving "very useful quantum computers" could take 15 to 30 years, with 20 years being the general consensus. This caused a shockwave in the market, leading to a sharp decline in quantum stocks beginning January 8.

As investor confidence wavered, the declines continued with similar cautionary comments from Meta Platforms CEO Mark Zuckerberg, who estimated that quantum computing developments were still "a decade-plus out." Following these announcements, stocks like Rigetti fell by 14%, D-Wave Quantum dropped by 29%, and Quantum Computing plummeted by 37%.

Despite this downturn, there were moments of optimism. On January 9, D-Wave's CEO Alan Baratz publicly challenged Huang's timeline, emphasizing that various quantum computing approaches exist. Additionally, D-Wave announced a new distribution partnership with Carahsoft Technology, while Quantum Computing revealed its collaboration with Sanders TDI, a biotech research institute focused on computational biomedicine.

The market showed signs of recovery later in January, especially after D-Wave announced its Leap Quantum LaunchPad program aimed at accelerating quantum application deployment. Positive news also came from Needham, which raised its price targets for both D-Wave and Rigetti, indicating increasing momentum in the quantum computing sector.

Looking at revenues, Rigetti and D-Wave are ahead of Quantum Computing. Rigetti generated about $11.9 million over the last four quarters, while D-Wave reported $9.4 million. In contrast, Quantum Computing's revenue was only $386,000. All three companies, however, are still incurring losses and carry high valuations due to the previous market excitement.

As expectations for quantum computing remain elevated, investors are advised to take a cautious approach. The rapid price-to-sales ratios (all over 100) and minimal revenue suggest that while the quantum computing sector holds transformative potential, a wait-and-see strategy may be prudent for investors at this time.

Quantum, Stocks, Investing