Quantum computing is one of the most promising technologies of the 21st century, with the potential to revolutionize everything from drug discovery to logistics. The ability of quantum computers to handle vast amounts of data and perform complex calculations at lightning speeds makes them a sought-after commodity for researchers and businesses alike.
However, as with any emerging technology, investing in quantum computing can be a risky proposition.
More specifically, quantum computing companies have yet to prove they can create a profitable business model, and any potential setback in the technology could result in large drops in share price for these higher volatility firms.
Today, we’re going to delve into the world of quantum computing and explore the possibilities it holds for investors. We’ll identify some of the top quantum computing stocks in the market today with the intent of providing our readers with the valuable insights needed to help them successfully navigate the complexities of investing in this exciting and rapidly-evolving field.
What Does Quantum Computing Mean?
Quantum computing is a paradigm of computing that leverages principles from quantum mechanics to enable the processing of information.
While classical computing relies on binary digits, or bits, which can only take the values 0 or 1, quantum computing utilizes quantum bits, or qubits, which can exist in superpositions (which is a fancy way of saying the ability of a quantum system to be in multiple states at the same time until something is measured) simultaneously. This property of qubits allows quantum computers to perform certain calculations much faster than classical computers.
To illustrate this concept, consider a coin that can be either heads or tails. In classical computing, this is analogous to having a bit that can take on only one of two states. In contrast, a qubit can exist in a superposition of both states (or both sides of the coin) at the same time. This expands the possible number of combinations exponentially as more qubits are added, allowing for parallel processing of information.
Quantum computing holds tremendous potential for solving complex problems in areas such as cryptography, optimization, and machine learning. However, it is still in its early stages of development and requires specialized hardware and software to operate. The technology also faces significant challenges, such as error correction and scalability, before it can achieve its full potential.
This is precisely why now marks such an interesting time for investors to enter the quantum computing field. The potential is enormous; however, the use case of utilizing quantum technology in a business’s operations is still to be proved. This presents an attractive risk-reward opportunity for growth investors who believe quantum computing can provide real value to companies in a variety of different industries.
How Should You Analyze Quantum Computing Stocks?
When analyzing quantum computing stocks, traditional metrics such as revenue or cash flow may not provide a complete picture of the company’s potential for growth. Unlike established companies, many quantum computing firms are in the early stages of their development, with their earnings potential based largely on future growth projections. As such, investors should focus on other key indicators to assess the company’s potential for success.
First and foremost, investors should evaluate the company’s technology. Quantum computing is a highly specialized field, and the technology behind it can be complex and varied. Investors should look for companies with unique and innovative technologies that have the potential to disrupt their market and create long-term value. As well, investors should look to understand the underlying business model a company plans to use alongside its quantum technology. This will have a large impact on future metrics like profitability, gross margins, cash flow, and revenue growth.
Secondly, investors should consider the market the company is trying to serve. Quantum computing has the potential to impact a broad range of industries, from healthcare to finance, and investors should focus on companies that have identified a specific market niche and are working to establish themselves as a leader in the space.
Another key metric to consider is the company’s bookings. As quantum computing is still in its early stages, many companies may not yet have substantial revenue streams. However, bookings can be a useful indicator of the demand for the company’s technology and its likelihood of becoming an industry leader.
Investors should also assess the company’s debt levels. Many quantum computing stocks operate on a tight budget, and excessive debt can hinder their ability to invest in research and development. Companies with manageable levels of debt will be better positioned to weather market fluctuations and capitalize on future growth opportunities.
Finally, investors should pay close attention to the company’s management team and their strategic direction. The success of a quantum computing penny stock will ultimately depend on the vision and execution of its leadership team. Investors should look for companies with experienced and forward-thinking management teams that have a clear plan for growth and are committed to executing that plan (while also being willing to pivot as needed) over the long term.
By focusing on these key indicators, investors can gain a better understanding of the potential risks and rewards associated with investing in quantum computing penny stocks. While these stocks can be volatile and risky, a thorough analysis of these key factors can help investors make informed investment decisions and substantially minimize their risk in this already volatile industry.
5 Best Quantum Computing Stocks in 2023
Growth investors are always looking for the forefront of technological innovation, and companies that can leverage quantum computers to solve real-world problems have immense potential to achieve exponential revenue growth.
With this in mind, here are five stocks in the quantum computing industry that are showing potential as industry leaders in the field:
IonQ (IONQ)
Image Source: IonQ
Starting off our list is IonQ, which is a true definition of an innovative company.
More specifically, IonQ sells access to several quantum computers of various qubit capacities. The company currently makes access to its quantum computers available via cloud platforms and also to select customers via its own cloud service.
The company derives its revenue from its quantum-computing-as-a-service arrangements, consulting services related to co-developing algorithms on a customer’s quantum computing systems, and contracts associated with the design, development, and construction of specialized quantum computing systems.
Essentially, IonQ is developing quantum computers (and other quantum-based tech) and charging companies a monthly usage fee to gain access to their technology through the cloud. This business model holds great potential in terms of free cash flow generation and scalability, which is primarily why the company garners the number one spot on our list today.
Further, IonQ has $16.37 million in revenue over the TTM already and currently trades at 124.71 times sales with a market cap of $2.07 billion. This is an expensive price tag for such a young company. However, it reflects the past success and high expectations investors have for IonQ to execute in the future.
Quantum Computing Inc (QUBT)
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Quantum Computing Inc is focused on providing software tools and applications for quantum computers. Its products include the Qatalyst, Qatalyst Core, and Quantum Application Accelerator.
The company’s main service offering Qatalyst enables developers to create and execute quantum-ready applications on conventional computers while also allowing customers to run advanced applications on quantum computers as needed. Essentially, Quantum Computing Inc is focusing on helping companies move regular operations from classic computers to quantum-based solutions.
QUBT is a pre-revenue company (with some small initial orders recognized), meaning they rely on debt and capital raises to fund further research and innovation. The promise and the potential of Quantum Computing Inc comes mainly from the company’s ability to help their customers transition from regular computing to quantum computing technology solutions.
Again, though, the price tag is high for this mainly pre-revenue company, and any potential hiccup in the development of their quantum computing research and development could lead to a sharp drop in share price.
Arqit Quantum (ARQQ)
Image Source: Arqit
Arqit Quantum is building a symmetric encryption system reborn for the cloud. It supplies the quantum encryption Platform-as-a-Service model that makes the communication links of any networked device secure against current and future forms of cyber-attacks (even from another quantum computer).
Its product, QuantumCloud, enables any device to download a lightweight software agent, which can create keys in partnership with any other device.
The company is showing promise in the quantum computing market, as they’re one of the few firms that has shown signs of profitability and proven value to their customers.
Arqit has relatively little debt and a large cash position, as well as a large backlog of future orders. With only $1.94 million in trailing twelve-month revenue and a market cap of $73.43 million Arqit’s share price has room to run as they continue to grab market share.
Additionally, with a share price of $0.46 at the time of writing this the company’s share price is down 89.78% over the past year. This could potentially be a great risk/reward investment for patient investors who are willing ride out the volatility as the company continues to combine cloud computing, quantum computing, and cybersecurity in one seamless solution.
D-Wave Quantum Inc. (QBTS)
Image Source: Businesswire
A little-known quantum computing stock is D-Wave Quantum which has a wide berth of solutions in the quantum computing segment.
More specifically, D-Wave is engaged in the development and delivery of quantum computing systems, software, and services, and is also a commercial supplier of quantum computers. It delivers customer value with practical quantum applications for problems as diverse as logistics, artificial intelligence, materials sciences, drug discovery, scheduling, cybersecurity, fault detection, and financial modeling.
Quantum computing has the potential to revolutionize countless industries and D-wave is working to be a provider of quantum breakthroughs that will help companies regardless of the industry help improve business operations. With a market cap of $117.29 million and trailing-twelve-month revenue of $7.38 million gives D-wave a price-to-sales ratio of 13.99, making it one of the cheaper quantum computing stocks on our list.
Rigetti Computing, Inc. (RGTI)
Image Source: Rigetti
Rigetti Computing Inc is engaged in the business of full-stack quantum computing. Its proprietary quantum-classical infrastructure provides ultra-low latency integration with public and private clouds for high-performance practical quantum computing solutions. The company has developed the industry’s first multi-chip quantum processor for scalable quantum computing systems which should enable them to build a lasting competitive advantage in the industry.
All this is a fancy way of saying Rigetti — in a (somewhat) similar fashion to the other companies on this list — is building a cloud-based system to help companies use quantum computing algorithms to improve how their business operates. Additionally, the company also builds the quantum processors used to power these super computers (which should be another competitive advantage the company can exploit).
$105.48 million in cash, $36.39 million, a market cap of $139.64 million, and $14.39 million in revenue, gives Rigetti a price-to-book value of only 1.18 (along with a price-to-sales ratio of 9.02). This is an impressive value play for quantum computing investors which also holds impressive upside potential as the company continues to carve out market share and expand upon their service offerings.
Should You Invest in Quantum Computing Companies?
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Whether or not you should invest in quantum computing stocks comes down to your risk tolerance, investment time horizon, and overall financial goals.
The penny stocks mentioned above offer incredible potential as they continue to build out this revolutionary technology, however there are almost certainly going to be some bumps along the road as the technology is still developing and new competitors are constantly entering the space.
In addition, government regulation of quantum computing (much like artificial intelligence today) could have a large impact on the industry’s ability to grow.
Alongside investing in quantum penny stocks, investors could also diversify their portfolio by investing in larger quantum computing companies like Honeywell (which is currently working on their own Honeywell Quantum Solutions) and IBM (which is developing an IBM quantum network).
This should help limit the risk, volatility, and unknowns of investing in quantum computing penny stocks by adding in some larger cap firms who have diversified business models.
When investing in such new technologies, maximizing potential returns while mitigating risk should always be at the forefront of investor’s minds.
In summary, traditional computers are quickly becoming second tier to the ability and underlying innovation quantum computers promise.
Investing in quantum technology today comes with considerable risk, however it also comes with outsized potential as the practical applications for quantum computing continues to improve.