(Bloomberg) -- One of Wall Street’s most speculative trades just had some of the froth wiped out in dramatic fashion. The outlook is looking murky from here onwards.
Quantum computing stocks — some of which soared more than 1,000% last year — have tumbled after Nvidia Corp.’s chief executive officer last week said that strong use cases for the technology are probably more than a decade away. The reckoning was the latest sign that the euphoria had become overblown, after some in the sector lost more than half their value in recent trading days.
The current trading action “rhymes with the dot-com bubble,” said Bill Stone, chief investment officer at Glenview Trust Co. “It’s hard to make any kind of long-term investment case for quantum right now.”
D-Wave Quantum Inc., Quantum Computing Inc. and Rigetti Computing Inc. were among those that saw dramatic declines recently, though they gained on Tuesday.
The attraction to quantum computing — with processing power millions of times greater than regular computers — is in its potential to spur massive advances for industries including life drug discovery, advanced material design and encryption.
But the comments from Nvidia’s Jensen Huang underscored the key issue with the stocks: despite potentially big implications from the technology in the future, the companies are unlikely to make much money from it anytime soon. Alphabet Inc., which had a quantum computing breakthrough in December, acknowledged that the technology has no practical applications at the moment.
The frenzy has even swept up companies based on their names: Quantum Corp., a data management company, gained more than 670% last year, only to drop about 60% so far in 2025. Quantum-Si Inc., a life science company developing protein sequencing platforms, nearly quadruped in the last two months of 2024.
Investors are increasingly betting against the group. According to S3 Partners, there is “a high level of conviction in the quantum computing short trade with $58 million of additional short selling in the first two weeks of the year.”
Options trading on major quantum names also recently hit a record high. While implied volatility has remained elevated, with investors anticipating further wide swings, the skew — or relative value of puts versus calls — has taken on a more bearish tilt after the comments from Nvidia’s CEO.
“We saw call volumes triple from early November to late December, but put volume has now overtaken that record call volume,” said Brent Kochuba, founder of options market analysis firm SpotGamma.
In a defense of the sector on Friday, IonQ CEO Peter Chapman touted the potential of quantum technology and said he expects the company to be profitable with sales near $1 billion by the end of the decade.
Still, most quantum companies are burning cash and generating little in the way of sales right now. IonQ is projected to lose $189 million on revenue of $83 million in 2025, according to data compiled by Bloomberg. Rigetti is expected to report sales of just $11.2 million in 2024, a decline from the previous year. It is also unprofitable, and expected to remain so for the next several years. However, the stock recently boasted a market value above $5.6 billion, making its valuation off the charts by traditional metrics.
The opportunity to be invested in future winners makes some investors unwilling to fully dismiss quantum stocks, despite their volatility.
Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management, said his research team was monitoring the sector and the companies.
“We wouldn’t invest in them now because they lack the factors we use in adding stocks to our portfolios, like balance-sheet strength, profitability, a dividend, and whether they can grow in a number of market conditions,” he said.
“However, you could’ve said the same about a lot of big tech stocks at some point. I wouldn’t be surprised if in a year or so we started to consider some quantum stocks.”
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Just 20% of Nasdaq 100 Index components are trading above their 50-day moving average, the lowest such ratio since April, and down from an October peak above 80%. The weakening technical picture comes amid a rocky stretch for the index, which has dropped about 6% off a December peak.
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--With assistance from Natalia Kniazhevich, David Marino, Subrat Patnaik and David Watkins.
