Investors have been enamored with artificial intelligence (AI) stocks. Quantum computing stocks may be next. Companies such as Quantum Computing Inc. (NASDAQ: QUBT), IonQ (NYSE: IONQ), and Rigetti Computing (NASDAQ: RGTI) are up big in the last few months. Investors are betting on these quantum computing companies as the technology hits the mainstream again, with recent breakthroughs from Alphabet's research division.
If commercialized, quantum computing could disrupt just about every industry in the world, but especially cloud computing, making it a technology potentially on par with the recent developments in AI. Should you buy quantum computing stocks like Rigetti and IonQ in 2025? Let's dig in further and find out.
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Betting on technological breakthroughs
Quantum computing has the chance to disrupt many parts of the economy. But why? Simply put, quantum computers can offer a steep change in the complexity of problems that can be solved with computers. By using the uncertainty of quantum mechanics, the computers operate differently than traditional transistor-based systems, allowing a user to figure out problems instantly that would take a traditional supercomputer years. 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 -- otherwise called Qubits -- that can get disrupted by the outside environment and introduce errors in the computing process, quantum computers have remained small for the time being and in the early stage research process. Recently, researchers have made progress in this area. For example, Alphabet's quantum computing division came out with a new quantum computer chip called Willow that reduces the errors in the quantum system as it scales up.
Other companies are working hard to solve these issues, including Rigetti Computing, IonQ, and Quantum Computing Inc. All three of these stocks are up hundreds of percents or more in the last few months. Quantum Computing Inc. is up over 4,000% in the last six months, bringing in some incredible returns for shareholders this year.
Big losses, high valuations
Investors are falling over themselves with these quantum computing growth stocks. However, if we look under the hood, the financials are not pretty. IonQ generated $37.5 million in revenue over the last 12 months, with a $171 million net loss. Rigetti generates just $12 million in revenue and loses $60 million a year. Quantum Computing Inc. is even worse, generating less than $1 million in annual revenue and losing $23 million a year.
All three of these stocks now have market caps in the billions and a price-to-sales ratio (P/S) above 100. Bulls and management may argue that the stocks reflect the future potential of these companies. If quantum computing is solved, revenue and earnings for some of these businesses will soar.
That's a big caveat, though -- "if" quantum computing can be brought to the masses. Who is to say it will ever happen, or if it will occur within the next few years?
QUBT PS Ratio data by YCharts.
Should you buy quantum computing stocks?
I have no qualms with investors betting on an emerging sector. There was a lot of money to be made from the AI boom of the last few years, and it likely will be in the future. There is a difference between AI and quantum computing: Companies have already figured out how to bring AI tools to the individual and to businesses through software. It is still unclear whether progress in quantum computing will get far enough to make the technology mainstream.
If it does, who is to say what companies will be the ones to do it? They could be the three hot 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 soared, making it even more difficult to rationalize where they trade. These are companies with barely any revenue that have market caps in the billions. The numbers don't make sense.
An unproven technology in the early stages, uncertainty around who the winning company will be, and nosebleed 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, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Brett Schafer has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
