IonQ and Rigetti stock prices have jumped in the past few years, transforming them into multi-billion-dollar companies. RGTI stock has jumped by 5,255% in the last 12 months, bringing its market capitalization to over $12 billion.
IonQ stock, on the other hand, has jumped by 692% in the same period, bringing it valuation to over $23 billion. This article explores why these companies are pointing to a quantum computing bubble that could pop in the coming months or years.
Why quantum computing stocks have soared
Quantum computing stock like IonQ and Rigetti Computing have done well as investors bet that the industry will become the next big thing in the technology industry.
Some experts believe that the industry might become the next big thing once the artificial intelligence hype fades. This view is supported by reports by some of the most respected organizations in corporate America.
McKinsey, a top consulting company, noted that the industry would likely jump into a $100 billion market by 2030 and that companies in the sector will hit $95 billion in revenue by 2035. The report also predicted that the industry will be worth almost $200 billion by 2040.
Meanwhile, Boston Consulting Group (BCG), another top player in the consulting industry, predicted that the industry will create up to $850 billion in economic value by 2040.
Therefore, IonQ and Rigetti are doing well as investors predict that they will become the main beneficiaries when the industry takes off.
IonQ stock price and valuation disconnect
One example of why the quantum computing industry could be in a bubble is IonQ, whose stock has jumped in the past few years. This jump has been much bigger than what we predicted before it started.
IonQ is now a company worth over $23 billion, yet it has limited earnings and revenue. The most recent results showed that the company had a revenue of $20.6 million in revenue, bringing the six-month figure to $28 million.
IonQ generated a net loss of $176 million in the quarter and $209 million in the year’s first half. Analysts expect that IonQ annual revenue will be $91 million this year and $171 million in the next financial year.
At the same time, IonQ’s earnings are expected to be in the red for a while, with the earnings per share expected to be 72 cents this year and $1 next year.
Therefore, while the company is growing, it is hard to justify a price-to-sales ratio of 303.
Rigetti Computing is an $11 billion company without revenue
Meanwhile, Rigetti Computing is a company valued at over $11 billion that has no revenue and is losing substantial sums of money.
The company said that its revenue in the last quarter was $1.8 million, while its net loss stood at over $39.7 million.
Analysts expect that its annual revenue this year will be $8.15 million, down by 24% from the same period last year. It will then make $21 million next year.
As with IonQ, it is hard to justify a price-to-sales ratio of over 1,000 in a company, unless it is seeing robust revenue and earnings growth.
Some analysts have also argued that we are in an AI bubble. The main difference between the AI and the quantum computing industries is that in AI, companies like NVIDIA, AMD, and Palantir are seeing strong revenue and earnings growth.
In quantum, the biggest companies in the industry have achieved premium valuations while not having any earnings growth.
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