Rigetti Computing, Inc. (RGTI) and D-Wave Quantum Inc. (QBTS) experienced significant declines, with both stocks falling nearly 30% today.
Rigetti designs quantum computers and offers cloud-based quantum services, while D-Wave develops quantum computing systems and provides software, cloud services, and professional solutions for several industries.
Why Rigetti (RGTI) and D-Wave Quantum Inc. (QBTS) Plunged Today?
On December 9, Alphabet Inc. (GOOGL) introduced the Willow quantum chip, which is a significant milestone in quantum computing. The announcements gave a significant boost to quantum computing stocks like Rigetti and D-Wave which surged around 140% and 93% between December 9 and December 18 market close.
Both stocks face sharp declines today, primarily because they seem to have become bubble stocks. These companies experienced massive price surges following Google’s breakthrough in quantum computing, which sparked investor optimism. However, as reality sets in, investors are realizing that practical, scalable applications of quantum computing are still years away, requiring billions in ongoing investments. As a result, these stocks are now being seen as speculative and overvalued, with the possibility that these companies may not survive, while tech giants like Google (GOOGL) are more likely to succeed in this field.
In a post on social media platform X, Citron Research mentioned that one clear indicator of this mismatch between market expectations and reality is these companies’ research and development (R&D) spending. For example, IonQ (IONQ) allocated $33 million to R&D last quarter, and Rigetti spent $12 million, amounts that are relatively small next to the much larger R&D expenditures of tech giants like GOOGL. However, D-Wave only spent $2 million on R&D during the same period. The inconsistency is quite noticeable for a company that claims to offer “integrated high-performance quantum systems,” the firm stressed. This discrepancy between spending and the promises made by these companies reflects the speculative nature of their stock prices.
Moreover, D-Wave’s recent equity offering at just $2.50 a share shows the financial instability and lack of alignment with their valuation, Citron noted. As the market begins to reassess the hype surrounding these stocks, it becomes clear that the path to profitability for these companies will be long and uncertain. In contrast, firms like Google, with their vast resources and established experience, are better positioned to lead the quantum computing revolution.
While we acknowledge the potential of RGTI and QBTS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than QBTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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