Quantum computing has been one of the hot trends over the past few months as stocks have doubled or more followed Alphabet‘with (NASDAQ: GOOG) Willow announcement. Investors looking for any way to play in the quantum computing space have pushed microcap stocks into the stratosphere.
Then NVIDIA (NASDAQ: NVDA) CEO Jensen Huang, who is well-respected in the tech industry, had some disparaging comments about the industry. This led to a sharp drop in the stock. According to the data submitted by S&P Global Market Intelligence, IonQ (NYSE: IONQ) down 32.3% this week, Quantum Computing (NASDAQ: QUBT) fell by 48.7 percent and D-wave Quantum (NYSE: QBTS) it fell by 36.9 percent.
The stock plunge followed Nvidia CEO Jensen Huang’s Q&A with analysts at CES in Las Vegas. Asked about the future of quantum computing, he said the timeline could be between 15 and 30 years until “very useful” quantum computers emerge. Here is a relevant quote from Huang:
if you said 15 years is very useful quantum computers, that would probably be on the early side. If you said 30 is probably late. But if you had picked 20, I think a whole bunch of us would have believed it.
To be clear, Huang did not say that quantum computing is a pipe dream. In fact, he said Nvidia is working with almost every quantum computing company in the world. But he thinks current expectations for near-term revenue growth may be overblown.
The statement drew opposition from quantum computing fans, but it’s hard to argue with the idea that quantum computing is many years away from becoming a meaningful business. Despite multibillion-dollar market caps before this week’s decline, IonQ, Quantum Computing and D-Wave had combined revenues of less than $50 million over the past 12 months.
The fundamentals do not support the valuation, which is not surprising for an early technology. Now the question is when it will become a real business.
One person who dismisses Huang’s thinking is IonQ CEO Peter Chapman, who said today: “We believe IonQ will be profitable, with sales approaching $1 billion, by 2030.”
The $1 billion revenue target he “believes” is achievable doesn’t exactly disprove Huang’s thesis. It’s still a relatively small company, and IonQ trades for 7x revenue by 2030, if IonQ can reach $1 billion in revenue by then, as the CEO hopes.
He also highlighted a bigger problem, which is that big tech, including Nvidia, one of the industry leaders, has invested $50 billion in quantum technologies. IonQ may be a pure play, but it may not have the biggest quantum business in the next 15 to 30 years.
