Quantum Computing Stocks: Separating Hype from Reality
The quantum computing space has been abuzz with excitement, driving stocks like Rigetti Computing (RGTI) to unprecedented heights. However, CEO Subodh Kulkarni is urging investors to temper their expectations, emphasizing that sustainable sales growth and profits are still a ways off.
A Reality Check
Kulkarni, an engineer by training, stressed that the company is still in the technology development phase. “We need to perfect our technology before we can see a material difference in sales,” he explained. This cautionary tone comes amidst a frenzy of activity in quantum computing stocks, which have attracted momentum traders in recent months.
The Quantum Computing Landscape
On Tuesday, Rigetti Computing’s stock surged 48%, while D-Wave Quantum (QBTS) rose 23% and Quantum Computing (QUBT) jumped 14%. However, these gains were preceded by a sharp decline the day prior, following comments from Meta (META) CEO Mark Zuckerberg that “very useful” quantum computing is likely a “decade-plus out.”
A Long Road to Profitability
Rigetti Computing’s market cap has surpassed $2 billion, but the company has yet to turn a profit from its quantum chipmaking efforts. In fact, it lost $45 million on a net basis through the third quarter of last year. While Kulkarni pushed back on the need for additional funding, he acknowledged that the road to profitability will be long.
Government Contracts and Cash Flow
“We’re in investment mode right now,” Kulkarni said. “We do have some sales, mostly from government contracts, but we expect material sales opportunities to emerge three to five years from now.” He added that the company should become cash flow break-even around that time, with profitability following later.
Wall Street’s Bullish Outlook
Despite the uncertain profit outlook, Wall Street remains optimistic about the sector. B. Riley analyst Craig Ellis noted that recent technical advances offer “broadly encouraging” signs for quantum computing’s long-term potential. As the sector continues to evolve, it’s essential to separate hype from reality and focus on the tangible progress being made.
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