D-Wave Stock Down As Nvidia Reverses Its Quantum Skepticism

Forbes

23-03-2025

JULICH, GERMANY - JANUARY 17: The D-Wave Systems Advantage quantum computer, the first such system ... More with a processor architecture of over 5,000 qubits to go into operation outside North America, is seen at the Forschungszentrum Jülich research center on January 17, 2022 in Julich, Germany. The computer, a quantum annealer, will be part of the Jülich UNified Infrastructure for Quantum computing (JUNIQ) and provide quantum-based computing solutions to researchers across Germany and Europe. The Forschungszentrum Jülich center conducts scientific research in the fields of energy and the environment, information, sustainable bioeconomy and the human brain. (Photo by)
How long does it take to turn a scientific breakthrough into a quick investment score?
When it comes to quantum computing, the answer remains unknown – but the world has been waiting for about 66 years. Due to the high trading volume in such stocks – including IonQ, Rigetti Computing, Quantum Computing, and D-Wave Quantum – high uncertainty about an imminent payoff suggests traders are raising their bets.
Big scientific breakthroughs can take decades to pay off. Two years ago, I decided to write about generative AI. The book, Brain Rush: How to Invest and Compete in the Real World of Generative AI, was published last July, many decades after the failure of an AI startup where I worked.
In a January Forbes post, I explored why Rigetti Computing stock had jumped so much and argued the stock would drop due to the company's declining revenues, operating losses, excessive valuation, and vulnerability to industry news snippets.
This piqued my interest in writing a book on quantum computing. Yet as I developed a book proposal, I found something missing – a vibrant ecosystem powered by compelling value for end-users – which seemed to be taking off in 2023 as I wrote Brain Rush.
In January, Nvidia CEO Jensen Huang said quantum computing could be decades away from realizing its economic promise. By last week, he had changed his mind – announcing a bet on a Boston-based research center to help Nvidia overcome the impediments to realizing the technology's potential.
While he tries to solve these problems, Palo Alto, Calif-based D-Wave Quantum has demonstrated companies will pay for quantum computing.
Yet investors should be skeptical of whether the technology will deliver more value for businesses and investors than does classical computing. D-Wave stock is considerably over-valued in Wall Street's view and competition from better financed players like Nvidia and Google could prevail over D-Wave in the race to commercialize quantum computing.
Quantum computing swaps traditional computing's bits that store either a 0 or a 1 with qubits, which can hold a combination of a 0 and a 1 enabling two qubits to hold four values thanks to 'exotic metal chilled to about 460 degrees below zero,' according to the New York Times.
In 1959, the American physicist and Nobel laureate Richard Feynman first suggested the idea for quantum computing, according to Britannica. Feynman suggested when electronic components get small enough, quantum effects – in which objects lack clearly defined states – could be used to build more powerful computers.
Such quantum effects were first discovered in the early 1900s by Max Planck, Albert Einstein, Niels Bohr, Werner Heisenberg, and others, according to the American Museum of Natural History.
Quantum effects were demonstrated by an experiment in which a single ph0ton of light passed through a screen with two small slits – producing a wavelike interference pattern of all available paths. However, this wave particle duality collapsed when one of the slits was closed to detect which path the photon took. The act of measuring changed the object being measured, noted Britannica.
Feynmann's idea was first realized in 1998 as a 2-qubit quantum computer. Built by scientists at the Los Alamos National Laboratory, MIT, and University of California - Berkeley, the system – while trivial for solving meaningful problems – did demonstrate the principles of quantum computation, according to Britannica.
Since then, quantum computing computers have been built with thousands of qubits and firms that build and operate such systems have gone public. Yet it remains to be seen whether quantum computers solve problems meaningful to businesses and consumers in ways vastly superior to what traditional computers can accomplish.
At the moment, quantum computing's headwinds vastly overpower its tailwinds.
Quantum computing's headwinds are ferocious – including big technical impediments, high error rates, deep-pocketed rivalry, and threats to a fundamental cybersecurity technology. Details follow:
The flip side of all the competition is that big companies might solve the knotty problems impeding the realization of Feynman's 1959 vision for quantum computing.
Nvidia's NVAQC could unlock a new growth opportunity for the chip designer. The lab's aims include tackling qubit noise and deploying quantum processors to solve "important problems, from drug discovery to materials development,' Nvidia's CEO Jensen Huang told Fast Company.
Meanwhile Google has reduced quantum computing's error rate during complex analysis by increasing the number of qubits. Experts believe 'it is only a matter of time' before quantum computing realizes its potential. 'People no longer doubt it will be done,' Harvard physics professor Mikhail Lukin told the Times. 'The question now is: When?'
Nvidia's bet on quantum computing followed backlash against Huang's January skepticism. D-Wave was among those challenging Huang's claim 'that practical use of quantum computing was decades away,' noted Fast Company.
D-Wave strongly disagreed with Huang. 'It's an egregious error on Mr. Huang's part,' D-Wave CEO Alan Baratz told Fast Company in January. 'We're not decades away from commercial quantum computers. They exist. There are companies that are using our quantum computer today.'
D-Wave has paying customers, loses money, and made a headline-grabbing announcement in March about the company's 'quantum supremacy' which has evoked skepticism. My take is there is no rush to buy the company's stock.
While D-Wave's revenue did not grow and lost more money in 2024, its bookings and customer count rose. More specifically, D-Wave's 2024 revenue of $8.8 million was 'essentially flat,' noted a company release, while the company's net loss of $146 million was nearly 50% more than in 2023.
The company increased its customer count and bookings last year. Specifically, D-Wave added two customers to reach 135 in 2024 while bookings increased 128% to $23.9 million in 2024, according to the company release.
D-Wave forecasts Q1 2025 revenue to exceed all of 2024's. 'We expect first quarter fiscal 2025 revenue to exceed $10 million including revenue recognized from the sale of an Advantage annealing quantum computer,' noted the company release. That sale is 'non-recurring,' according to TipRanks – suggesting there may be less here than meets the eye.
D-Wave also claimed the company had achieved quantum supremacy – the notion that its quantum computer outperformed traditional computers on a real-world problem. 'With record bookings, a record cash position and an unequivocal demonstration of our quantum system outperforming classical on a real-world problem," our progress is clear, said Baratz according to the release.
D-Wave based its quantum supremacy claim on a paper published March 12 in Science. D-Wave said it completed magnetic materials simulations 'in under 20 minutes with a quantum computer — a task that would have taken nearly a million years on a leading supercomputer at Oak Ridge National Laboratory,' D-Wave senior distinguished scientist Andrew King told the Wall Street Journal.
This achievement represents the 'Holy Grail' in quantum computing, Baratz told the Journal. 'This is what everybody in the industry has been aspiring to, and we're the first to actually demonstrate it,' he added.
However, academics have already disputed D-Wave's claims. For example, Dries Sels and colleagues at New York University performed similar calculations on a regular laptop using tensor networks – which reduce the amount of data and hence energy needed to perform simulations, reported New Scientist.
The debate rolled on with King disputing Sels' claim – concluding, 'They're great researchers, but it's not something that refutes our supremacy claim,' according to New Scientist as Sels retorted King's response was 'petty.'
Another scientist echoed Sels' claim – arguing classical computers can achieve comparable results. Since D-Wave's paper made its claim of quantum superiority, scientists have discovered new methods that overcome classical computers' relative weakness in materials simulations, the Flatiron Institute's Center for Computational Quantum Physics research scientist Miles Stoudenmire told the Journal.
'We're just saying, 'Look, this one problem at this one time didn't beat classical computers. Try again,'' Stoudenmire added.
I will give D-Wave the last word here. Competing studies tested only a subset of problems addressed in D-Wave's work and the company's quantum simulations 'covered a broader range of lattice geometries and conditions,' Baratz told Quantum Source.
What does this all mean for investors? D-Wave stock is about 12% too high, according to TipRanks which compare the company's current stock price of $8.46 to $9.63 – the average 12-month price of five Wall Street analysts.
Although D-Wave has $300 million in cash, the company's lack of growth suggests a investors may need to wait for Baratz to devise a new growth vector to propel the company's stock.