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Quantum computing was one of the hot trends of the past few months as stocks have doubled or more following Alphabet's (NASDAQ: GOOG) Willow announcement. Investors looking for any way to play the quantum computing space have pushed microcap stocks into the stratosphere.
Then NVIDIA (NASDAQ: NVDA) CEO Jensen Huang, who is revered in the tech industry, had some dismissive comments about the industry. That sent shares sharply lower. According to data provided by S&P Global Market Intelligence, IonQ (NYSE: IONQ) plunged 32.3% this week, Quantum Computing (NASDAQ: QUBT) was down 48.7%, and D-Wave Quantum (NYSE: QBTS) was down 36.9%.
Jensen Huang's quantum prediction
The drop in stocks came after Nvidia CEO Jensen Huang's Q&A with analysts at CES in Las Vegas. When answering a question about the future of quantum computing, he said the timeline may be between 15 and 30 years until there is "very useful" quantum computers. This is the relevant quote from Huang:
if you kind of said 15 years for very useful quantum computers, that'd probably be on the early side. If you said 30 is probably on the late side. But if you picked 20, I think a whole bunch of us would believe it.
To be clear, Huang didn't say quantum computing was a pipe dream. In fact, he said Nvidia is working with nearly every quantum computing company in the world. But he thinks the current expectations for near-term revenue growth may be overblown.
Speculation had driven quantum computing
The statement brought pushback from fans of quantum computing, but it's hard to argue against the idea that we're many years from quantum computing being a meaningful business. Despite multibillion-dollar market caps before this week's drop, IonQ, Quantum Computing, and D-Wave had combined revenue of under $50 million over the past 12 months.
The fundamentals don't back up the valuation, which isn't surprising for early-stage technology. The question now is about when this will become a real business.
IonQ puts out a billion-dollar revenue target
One person pushing back on Huang's thoughts is IonQ's CEO Peter Chapman, who said today, "We believe that IonQ will be profitable, with sales approaching $1 billion, by 2030."
A $1 billion revenue target that he "believes" is achievable doesn't exactly disprove Huang's thesis. That’s still a relatively small business, and IonQ trades for 7 times 2030 revenue, if IonQ can reach the $1 billion revenue level by then, as the CEO hopes.
He also highlighted the bigger problem, which is that big tech, including Nvidia, one of the industry leaders, has invested $50 billion in quantum technologies. IonQ may be a pure play, but it may not have the biggest quantum business in 15 to 30 years.