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Globe and Mail
24-05-2025
- Business
- Globe and Mail
Better Artificial Intelligence Stock: Rigetti Computing vs. D-Wave Quantum
Artificial intelligence (AI) is transforming the global economy, driving automation, productivity, and creativity. Quantum computers may hold the key to unlocking the next generation of AI technology to tackle highly complex challenges and analyze massive datasets far beyond the reach of classical computers. Rigetti Computing (NASDAQ: RGTI) and D-Wave Quantum (NYSE: QBTS) are two emerging leaders in the field, well-positioned to capitalize on a significant market opportunity. Shares of both companies have soared, and there are plenty of reasons to believe the rally can keep going. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Let's explore which one of these quantum computing AI stocks is the better choice for your portfolio right now. The case for Rigetti Computing Quantum computers harness qubits, the fundamental units of information, which exploit quantum physics principles, like superposition and entanglement, to exist in multiple states simultaneously. This enables quantum computers to process calculations in parallel, far surpassing the capabilities of traditional binary-based computers. While the technology is still being refined due to the enduring trade-off between qubit power and system stability, Rigetti Computing's superconducting gate-based technology is delivering an expanding number of real-world use cases. The company's 84-qubit Ankaa-3 system, launched in first-quarter 2025, marks an industry milestone that could transform machine learning, optimization, simulations, cryptography, and AI. Optimism has powered Rigetti's stock to a spectacular 937% return over the past year as of this writing. An advantage to Rigetti's approach is its modular design, with the flexibility to combine multiple quantum processing units (QPUs) to scale performance. Compared to D-Wave Quantum, which specializes in a separate quantum annealing approach to leverage qubits, Rigetti's gate-based superconducting architecture may be more versatile and future-proof, particularly for AI applications. Despite recurring financial losses and limited sales with first-quarter revenue of just $1.5 million for the period ended March 31, the Ankaa-3 system is expected to capture a wave of demand going forward. Wall Street estimates project Rigetti's revenue to accelerate from $8.8 million in 2025 to $23 million in 2026. Industry forecasts estimate that the quantum computing market could grow to $90 billion to $170 billion by 2040, highlighting a significant growth runway for Rigetti. Investors with a long-term perspective who believe Rigetti Computing is just getting started and that its quantum technology will prove superior may find the stock a compelling option to buy and hold. The case for D-Wave Quantum As promising as Rigetti's potential may be, D-Wave Quantum has a commercial lead, generating stronger growth. In the company's first quarter (for the period ended March 31), revenue reached $15 million, climbing by 509% year over year. This was driven by the delivery of its first "Advantage" quantum computer system to a high-performance computing (HPC) center in Europe, intended to facilitate breakthroughs in AI and quantum optimization applications. D-Wave Quantum is also benefiting from the availability of its systems on cloud-computing platforms through quantum computing as-a-service (QCaaS). D-Wave has 133 customers, including Mastercard, Accenture, and Lockheed Martin, using its quantum systems. These tailwinds have carried the stock to a whopping 1,184% return over the past year, making D-Wave one of the hottest stocks on Wall Street. Yet, the explosive stock price gains mean that D-Wave Quantum now trades at an eye-watering 173 times revenue as a price-to-sales (P/S) ratio, suggesting investors are paying an extreme premium for the company's expected growth far out into the future, which is far from certain. For comparison, mega-cap AI leader Nvidia looks like a bargain at a P/S ratio of just 25.5. Yet, if there is a silver lining, D-Wave Quantum stock is still less expensive on a relative basis than shares of Rigetti Computing, which is trading at a P/S ratio of 289. Investors convinced that D-Wave Quantum represents the future of computing and artificial intelligence could justify its pricey valuation, with an expectation that its shares have more upside in the long run. QBTS PS Ratio data by YCharts. Decision time: Not worth chasing D-Wave Quantum's growth momentum makes it my pick as the better AI stock over Rigetti Computing. However, its high valuation renders it a highly speculative investment at current prices. Given uncertainties around its path to profitability in a competitive industry, expect continued volatility. I'd wait for a price correction before buying. Should you invest $1,000 in D-Wave Quantum right now? Before you buy stock in D-Wave Quantum, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and D-Wave Quantum wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!* Now, it's worth noting Stock Advisor 's total average return is957% — a market-crushing outperformance compared to167%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Globe and Mail
18-05-2025
- Business
- Globe and Mail
D-Wave Pushes Back on Short Seller Case With Strong Earnings
After rising by an astonishing 683% in the last year, quantum computing firm D-Wave Quantum Inc. (NYSE: QBTS) has left investors divided. On one hand are the bulls who feel that the company's recent technological achievements have the potential to upend computing as we know it; these investors suspect that, despite signs of being overvalued, D-Wave has ample room to continue to ascend. [content-module:CompanyOverview|NYSE:QBTS] On the other hand, bearish investors suspect the company will eventually come crashing down, either due to overenthusiasm by other investors or failure to live up to its hype. Short sellers have recently made a case against D-Wave, arguing that the company's technology is not likely to usher in a quantum revolution after all and that its path to sustained and growing profitability is fraught. However, the company's early-May first-quarter 2025 earnings report might be a point in favor of the bulls, as D-Wave posted records in revenue, gross margin, and other metrics. Solid Revenue Growth May Suggest a Path Forward Revenue has long been a sticking point for investors hesitant to take up a position in D-Wave. Skeptics question the company's ability to generate revenue—and, more fundamentally, the marketability of its technology and products at this stage. Jensen Huang, CEO of chip giant NVIDIA Corp. (NASDAQ: NVDA), sent quantum stocks sliding in January 2025 when he speculated that useful quantum computers (with broad applications for business and personal use) were likely two decades away. While D-Wave may be at the forefront of one line of quantum technology development, if a solid path to revenue gains is not in sight for many years, investors will shy away. Fortunately, the company's first-quarter revenue of $15 million is one data point pushing back at this timeline. D-Wave's revenue surged by more than 500% year-over-year (YOY), thanks in large part to the sale of a quantum computing system. A single system sale does not automatically suggest revenue gains are in store going forward, but it may nonetheless provide some reassurance that D-Wave's products have a market. Along with the revenue boost, D-Wave also increased its customer base over this period. Strong GAAP Gross Profit and Cash Position Along with concerns about revenue, investors also hesitate regarding D-Wave's path to consistent profitability. While the company posted a net loss of $5.4 million for the first quarter, this is an improvement of $11.9 million compared to the prior-year quarter. Perhaps more importantly, D-Wave's GAAP gross profit came in at $13.9 million, a quarterly record for the company and an increase of more than 700% YOY. D-Wave's strong GAAP gross profit performance is thanks in part to its higher margin, high-profile sale in the first quarter—GAAP gross margin for the period reached 92.5%, up from 67.3% in the same quarter of 2024. With improving gross margins also comes a more favorable cash position, which is especially important as D-Wave continues to develop new technologies while it is not yet generating substantial revenue. The company ended the quarter with more than $304 million in cash and equivalents; D-Wave leadership said that this stockpile is sufficient to support the company until it reaches consistent profitability. [content-module:TradingView|NYSE:QBTS] In the Clear, or Still Reason to Pause? While D-Wave's earnings report was sufficiently positive to send shares skyrocketing by about 50% in the days immediately following its release, cautious investors may not yet be fully convinced about the company. [content-module:Forecast|NYSE:QBTS] For example, bookings (received customer orders that are expected to generate future net revenues) decreased by almost two-thirds YOY to $1.6 million. And while the company's customer base grew, it still only had a pool of 133 customers as of quarter's end. These may be reminders for some investors that D-Wave's position remains precarious. In the days following D-Wave's earnings announcement, analysts at both Benchmark and Needham & Co. boosted their price targets for the firm. Even so, with a consensus price target of $10.17, shares of QBTS currently exceed analyst predictions, suggesting that short-term upside potential may be limited or non-existent. Finally, though D-Wave has noted some promising technological achievements, investors should keep in mind that many experts still believe functional and commonplace quantum computing is still a long way off—and that major tech firms and an array of competitors are also working to be the first to bring these products to market. Where Should You Invest $1,000 Right Now? Before you make your next trade, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list. They believe these five stocks are the five best companies for investors to buy now...
