Quantum Computing Inc. (NASDAQ: QUBT), a company focused on building quantum-compatible chips and photonic hardware solutions for various applications, including high-performance computing, AI, and cybersecurity, has seen its stock price surge by an impressive 80% in a month, while it is up by over 3,000% in the last twelve months, reflecting the increasing interest in this potentially revolutionary field. Nvidia CEO Jensen Huang’s comment at the GTC Paris developer conference, stating “quantum computing is reaching an inflection point,” has led to positive momentum in quantum computing stocks lately.
Unlike traditional computers that use binary bits (0’s and 1’s), quantum computers utilize “qubits,” which can exist in multiple states simultaneously, allowing quantum computers to perform complex calculations and process vast amounts of data by exploring numerous potential outcomes at once. This capability has broad applications, from financial modeling and drug discovery to materials science.
Despite its promise, quantum computing faces a significant challenge: errors increase as systems become more complex with higher qubit counts. This makes the technology inherently volatile, a common characteristic of emerging, futuristic technologies. Despite these hurdles, significant advancements are being made. Companies like Google, IBM, and D-Wave have successfully built scalable quantum computers with dozens of qubits, a crucial step toward practical applications.
IBM is a leader in this space, with its 1,121-qubit Condor processor and ambitious plans to develop 100,000-qubit systems by 2033. Quantum Computing Inc. (QCi) has also introduced its Dirac 3 quantum system, specifically designed for complex optimization problems. Notably, Dirac represents a breakthrough as the first and only quantum system to natively solve integer problems using quantum digits (qdits) rather than traditional quantum bits (qubits). Each qdit operates with 200 discrete modes, a significant advancement over conventional qubit-based systems.
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QCi’s Approach and Offerings
QCi takes a fundamentally different approach from both D-Wave’s quantum annealing and traditional gate-model quantum computers. QCi specializes in photonics and quantum optics technology, creating quantum machines designed to operate at room temperature and low power at an affordable cost.
This room-temperature operation represents a significant departure from the extremely low-temperature superconducting systems used by companies like D-Wave, IBM, and Google. QCi’s photonic approach eliminates the need for complex and expensive cryogenic cooling systems, potentially making quantum technology more accessible and practical for widespread deployment.
QCi’s central innovation revolves around their thin-film lithium niobate (TFLN) photonic chip foundry in Tempe, Arizona, which became operational just last month. The company is fabricating photonic computing engines using this advanced material, enabling integrated photonics solutions. Notably, the company has secured multiple purchase orders for their foundry services through their 2024 Pilot Launch Program.
Investment Outlook and Risks
While quantum computing shows immense promise, it remains in a developmental stage and isn’t yet ready for widespread practical implementation. QCi’s revenue base of $385K in the last twelve months is trivial, and the company reported an operating loss of $28 million over the same period.
QUBT stock is highly susceptible to adverse market conditions, demonstrating significantly higher volatility compared to the broader market. For instance, during the 2022 inflation shock, QUBT stock’s value plummeted by 93%, whereas the S&P 500 experienced a peak-to-trough decline of 25%. Similarly, it fell by 73%, during the COVID-19 pandemic market downturn, much worse than the peak-to-trough decline of 34% for the S&P 500. This highlights the considerable risk of QUBT stock dropping during unfavorable market conditions.
Like most quantum computing stocks, QUBT represents a high-risk, high-growth potential investment. Key factors influencing its trajectory include continued technological improvements and managing costs. QCi could potentially sell numerous photonic chips in the coming years, which might continue to drive its stock higher.
As an investor, a bet on QUBT is a bet on the future potential of quantum computing and QCi’s position within that future. The company provides accessible and affordable quantum machines, and boasts large customers such as NASA and John Hopkins.
Looking at its past performance, QUBT stock has been quite volatile when compared to the broader markets. Returns for the stock were -49% in 2019, -46% in 2020, 110% in 2021, -56% in 2022, -40% in 2023, and 1713% in 2024. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile and has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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