This Shocking Stock Market Crash Will Wipe Out Billions by 2026—Are You Ready to Lose Everything?

As we look ahead to 2024, popular quantum computing stocks like Rigetti Computing, IonQ, and D-Wave are facing the specter of a potential reckoning amid a stock market that has recently shown signs of strain. The S&P 500 (^GSPC) has already dipped 5% from its peak in early November, raising alarms over elevated valuations that many analysts believe are indicative of a bubble—especially within technology sectors heavily invested in artificial intelligence (AI).

While the entire stock market seems to be trading at high valuations by historical standards, there's a case to be made that the excitement around AI could be justified due to its potential impact on the economy in the coming years. Quantum computing, however, presents a more complicated picture. Many experts suggest that this technology won’t be ready for widespread enterprise use for at least another decade, yet the stock prices of several companies in the sector have skyrocketed in the last three years, leaving valuations hovering in bubble territory.

• Rigetti Computing shares have surged a staggering 1,720%.
• IonQ shares have climbed 855%.
• D-Wave Quantum shares have increased by 794%.

Given these dramatic increases, it's critical for investors to scrutinize what quantum computing really entails and why experts believe a bubble may soon burst.

The State of Quantum Computing

At its core, quantum computing differs fundamentally from classical computing. Traditional computers use binary digits, or bits, which represent information as either 0 or 1. In contrast, quantum computers utilize quantum bits, or qubits, that can exist in states of superposition, effectively representing both 0s and 1s at once. Additionally, qubits can become entangled—meaning the state of one can be dependent on another, regardless of distance. This allows quantum processors to solve certain calculations much faster than classical computers, especially in areas such as optimization and simulation.

However, despite these revolutionary capabilities that could transform industries like drug discovery, materials science, finance, and cybersecurity, the technology is still in an early developmental phase. Various companies, including IonQ, D-Wave, Rigetti, Alphabet, and IBM, are pursuing different methods to create qubits. Each of these approaches faces challenges, particularly regarding qubit stability and error rates caused by environmental factors.

As it stands, no company has successfully developed a large-scale, fault-tolerant quantum system, although IBM aims to achieve this by 2029. The path to practical quantum computing remains fraught with obstacles.

Valuation Concerns and Market Dynamics

According to a report by Grand View Research, the quantum computing market is projected to generate $4 billion in revenue by 2030. In stark contrast, AI revenue is expected to reach $390 billion by 2025—indicating that companies are projected to invest nearly 100 times more in AI this year than in quantum computing over the next five years. This raises crucial questions about the sustainability of current valuations for quantum computing companies.

Industry leaders have echoed similar sentiments. Nvidia CEO Jensen Huang recently stated that "very useful" quantum computers are likely about two decades away. Likewise, Alphabet CEO Sundar Pichai remarked that "practically useful" quantum computers could take at least five to ten years to materialize, likening the current state of the technology to AI development in the early 2010s.

If Pichai's assessment is accurate, investing in pure-play quantum stocks such as IonQ, D-Wave, and Rigetti could be likened to buying shares of Nvidia back in 2015. However, the difference in valuations is striking: while Nvidia traded at around 3 times sales in 2015, the least expensive quantum stock, IonQ, currently trades at 145 times sales. D-Wave and Rigetti have even higher valuations, with price-to-sales ratios of 270 and 980, respectively.

Moreover, all three companies have capitalized on their soaring stock prices by issuing more shares to raise cash, which has diluted existing shareholders. Over the past three years, D-Wave has increased its share count by 209%, Rigetti by 164%, and IonQ by 77%. In contrast, Nvidia's share count grew only 9% during the same period.

The conclusion is clear: while quantum computing has the potential to revolutionize various industries, experts believe that significant breakthroughs are at least a decade away. The current valuations of popular pure-play quantum stocks are exceedingly high, and their aggressive share dilution raises additional concerns. As investor skepticism grows regarding inflated valuations, a reckoning in the quantum computing sector seems inevitable, possibly arriving as soon as next year.