Quantum Stocks Decline Amid Valuation Concerns
Investing.com -- Stocks of companies operating in the field of quantum computing faced a significant wave of selling on Thursday, leading to declines in the stock prices of four major firms. Rigetti Computing (NASDAQ: RGTI) dropped by 26%, Quantum Computing Inc (NASDAQ: QUBT) fell by 37%, D-Wave Quantum (NYSE: QBTS) lost 25%, and Quantum Corporation (NASDAQ: QMCO) was down by 39%.
The sharp decline appears to be driven by a shift in sentiment among investors reevaluating the soaring valuations in the quantum computing sector. Despite the losses of the day, these companies have achieved remarkable gains year-to-date (YoY): Rigetti Computing up by 700%, Quantum Computing up by 1,500%, D-Wave Quantum up by 650%, and Quantum Corporation up by 450%. The sector had been a favorite among momentum investors; however, doubts regarding the technology's current capabilities and concerns over inflated valuations are now coming to the forefront.
Another factor adding fuel to the fire was activist short-seller Citron Research targeting Quantum Corporation on social media. Citron has a history of targeting companies like Rigetti Computing, and its recent comments did not go unnoticed by the market. Citron criticized the sector, particularly highlighting the financials of Quantum Computing Inc. The short seller's remarks on the disparities in R&D spending among small-scale quantum firms and comparisons with technology giants raised questions about the sustainability of current valuations.
Citron Research stated: "Small-cap quantum stocks are in a bubble, but $QUBT stands out as the most ludicrous. The numbers tell the story. R&D spending is the MOST critical indicator in this space: last quarter $IONQ allocated $33 million and $RGTI allocated $12 million, which pales in comparison to technology giants like Google. However, $QUBT spent only $2 million on R&D—this is a striking mismatch for a company that claims to offer 'integrated high-performance quantum systems.' Let’s not forget shares were issued at $2.50 just a month ago. The finances simply don’t add up—follow the data."
As evidenced by the sharp declines in stock prices across the sector, investors seem to be heeding Citron's warning. The wave of selling reflects growing concerns about the inconsistencies between companies' market valuations and their actual investments in research and development, which is a critical aspect of achieving success in the high-risk quantum computing field. While the market continues to digest these proclamations, the volatility in quantum computing stocks serves as a stark reminder of the risks associated with investing in emerging technologies.