Investors are enamored with artificial intelligence (AI) stocks. Quantum computing stocks could be next. Companies like Quantum Computing Inc.(NASDAQ: QUBT), IonQ(NYSE: IONQ)And Rigetti computers(NASDAQ: RGTI) have grown enormously in recent months. Investors are betting on these quantum computing companies as the technology returns to the mainstream with recent breakthroughs Alphabet‘s research department.
If commercialized, quantum computing could disrupt virtually every industry in the world, but especially cloud computing, making it a technology potentially on par with recent advances in AI. Should You Buy Quantum Computer Stocks Like Rigetti and IonQ in 2025? Let’s dig in and find out.
Quantum computing has the opportunity to disrupt many parts of the economy. But why? Simply put, quantum computers can dramatically change the complexity of problems that can be solved with computers. By exploiting the uncertainty of quantum mechanics, the computers work differently than traditional transistor-based systems, allowing a user to immediately understand problems that would take a traditional supercomputer years to solve. The technology promises to help a wide range of industries, from self-driving cars and agriculture to physics simulation and drug discovery.
The problem is getting these computers to work reliably. With hypersensitive quantum bits – also called Qubits – that can be disturbed by the outside environment and introduce errors into the computing process, quantum computers have remained small for the time being and in the early stages of research. Recently, researchers have made progress in this field. For example, Alphabet’s quantum computing division came up with a new quantum computing chip called Willow, which reduces errors in the quantum system as it scales up.
Other companies are working hard to solve these problems, including Rigetti Computing, IonQ and Quantum Computing Inc. All three of these stocks are up hundreds of percent or more in recent months. Quantum Computing Inc. is up over 4,000% in the last six months, delivering incredible returns for shareholders this year.
Investors are falling over themselves with these quantum computing growth stocks. However, when we look under the hood, the financial figures are not pretty. IonQ generated revenue of $37.5 million in the last twelve months, with a net loss of $171 million. Rigetti generates only $12 million in revenue and loses $60 million per year. Quantum Computing Inc. is even worse: it generates less than $1 million in annual revenue and loses $23 million per year.
All three of these stocks now have market caps in the billions and price-to-sales ratios (P/S) above 100. Bulls and management could argue that the shares reflect the future potential of these companies. If quantum computing is solved, revenues and earnings for some of these companies will soar.
That’s a big caveat, though: “if” quantum computing can be brought to the masses. Who’s to say this will ever happen, or that it will happen in a few years?
I have no problem with investors betting on an emerging sector. There was a lot of money to be made from the AI boom of the past few years, and that will likely continue in the future. There is a difference between AI and quantum computing: companies have already discovered how to bring AI tools to individuals and to companies through software. It is still unclear whether advances in quantum computing will go far enough to make the technology mainstream.
If so, who’s to say which companies will do this? It could be the three popular stocks listed above, but it could also be Alphabet with its vast resources and unlimited budget, or a new company. Expectations for these stocks have skyrocketed, making it even harder to rationalize where they trade. These are companies with barely any turnover and market capitalizations running into the billions. The numbers are wrong.
An unproven technology in its early stages, uncertainty about who the winning company will be and bloody valuations: these are not the characteristics that indicate strong future returns for shareholders. Avoid buying quantum computing stocks for your portfolio in 2025.
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Brett Schafer has positions at Alphabet. The Motley Fool holds positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
Should You Buy Quantum Computing Stock in 2025? was originally published by The Motley Fool
