Sector Analysis: Quantum Computing: The New Wave?

Quantum Computing (QQ) is defying gravity, with stocks rallying at all-time highs. It seems investors are rallying on potential, not profit. Why? Quantum Computing isn’t just another tech trend; it could be world-changing. The promise: solving problems classical computers never could, from drug discovery to financial modelling.

But behind the buzz lies a volatile mix of speculative capital, government contracts, and IP-driven moats. In this post, we’ll dissect the quantum computing sector: who’s leading, what’s driving the recent rallies, and whether these sky-high prices are justified or just quantum foam. But first...

What is Quantum Computing?

Quantum computers differ significantly from traditional desktops, where you can surf the web and do your work. In simple terms, it's essentially a calculator boosted to the max. Unlike classical computers, which use electrical impulses in a binary manner (1s and 0s) to process information, quantum computers employ quantum bits, or qubits. By enabling subatomic particles, such as electrons or photons, to exist in several states at once, these qubits significantly improve processing power. This makes it possible for quantum computers to complete computations in a short amount of time that would be impossible for classical computers.

The reason there hasn't been any real commercial use is due to the complexity of achieving quantum computation. You need near-perfect conditions, such as near-zero atmospheric pressure and temperatures at 0 Kelvin (-273 °C), making it extremely expensive. Qubits are also subject to decoherence, which is essentially a disturbance in their environments that can cause errors.

Industry Overview

Nevertheless, the potential is there. The QQ sector has experienced significant growth over the past few years, marked by swelling corporate investments, a proliferation of start-ups, increased patent filings, and multiple government contracts. In 2024, the market size for QQ was estimated to be $1.1 billion, and forecasted to grow to $12.6 billion by 2032, exhibiting a CAGR of 34.8%. (PrecedenceResearch)

Supporting this growth is a cloth of technological achievements, from quantum error correction advances to the scale-up of qubit architecture, that have pushed the industry closer to fulfilling its business promises. The industry itself is split into hardware developers (such as IBM, Rigetti, and IonQ), software platform developers (such as Microsoft and Quantum Computing Inc.), and integrated service operators on both sides. There is a wide range of government and commercial quantum endeavours across the globe nowadays, including the U.S. National Quantum Initiative ($1.8 billion VC/startup funding in 2024 alone), Europe's Quantum Flagship Program, and China's increasing quantum patents surge.

Investment sentiment remains bullish, with multiple quantum companies achieving valuations that outstrip current revenues by orders of magnitude. The path to profitability is, however, long and uncertain. Profitability depends on whether companies in quantum tech can demonstrate applications that outperform classical equivalents, commercialise such applications at scale, and actually slice through the competitive noise.

Key Players

The quantum computing industry features a blend of tech titans and smaller, agile innovators, each with distinct strategies. Let's start with the Titans.

1. Alphabet (NASDAQ: GOOGL)

   Google is leveraging AI to enhance its QQ reliability through advanced error detection and correction techniques. Its main quantum processor is called Willow, and it has claimed to achieve "quantum supremacy" by executing highly complex calculations far beyond the reach of traditional supercomputers.

2. IBM (NYSE: IBM)

   Since 2017, IBM has generated nearly $1 billion in cumulative revenue for its Quantum offerings. IBM uses cutting-edge superconducting qubit hardware, hybrid-cloud solutions, and their own open-source Qiskit software development kit.

3. Microsoft (NASDAQ: MSFT)

   In February 2025, Microsoft showcased Majorana 1, the world's first quantum processor using topological qubits. While they claim a major breakthrough, experts have their scepticism. (Quantum Insider)

These are the tech giants, and we're not focused on them. The recent rallies come from smaller-cap companies that bank everything on Quantum Computing, the pure players, if you will. In the past year, these companies have exploded, with gains of over 1000% the past year:

1. IonQ (NYSE: IONQ)

   Ionic uses trapped ions, actual atoms suspended in electromagnetic fields and manipulated with lasers. These qubits have super-long coherence times, high fidelity, and full connectivity. Every qubit can talk to every other qubit. Ionic has been on a tear. They recently acquired Oxford Ionics (a UK quantum platform) for over $1 billion, unveiling synthetic diamond films for scalable quantum networks and developing mixed-species gates for faster entanglement. They recently announced a partnership with the U.S. Department of Energy, spiking the share price even further to $71 at its peak. They are burning through cash, though. In Q2, IonQ's free cash flow was negative $53.77 million. They are reliant on new equity proceeds to support their R&D and expansion plans.

2. Rigetti Computing (NASDAQ: RGTI)

   RGTI use superconducting qubits - tiny electrical circuits cooled near absolute zero. These qubits are controlled with microwave pulses and stitched together with their own programming language called Quill. It's a gate model design, the same path IBM and Google are on. Rigetti just showed off 99.5% two-qubit fidelity, and they've got $575 million in cash to scale. However, revenues remain lumpy, as they are tied to government contracts, pilot commercial deals, and cloud partnerships (notably with Microsoft), which drive revenue growth. It's a long-term R&D play for them. Currently, core operations remain deeply unprofitable with consistently negative EBITDA, operating margin, and free cash flow in every quarter.

3. D-Wave (NYSE: QBTS)

   D-Wave specialises in quantum annealing, a way to solve optimisation problems by letting qubits naturally settle into the lowest energy solution. Their new Advantage 2 system packs about 4,400 qubits, already in commercial use for logistics, scheduling, and AI. D-Wave's stock is up nearly 90% YTD because they have clients today. The trade-off is that it's not universal quantum computing, so its upside is going to be more niche. D-Wave's stock price rose 13% today following a report that the Trump administration could make moves to support the development of quantum computing technologies. The stock is likely also getting a boost from recent quantum contract wins with the U.S. Air Force.

4. Quantum Computing Inc. (NASDAQ: QUBT)

   QUBT builds practical, scalable, room-temperature quantum photonics products that harness the quantum nature of light to capture data, compute complex information, and securely communicate across networks. The stock skyrocketed 23% today, mainly because of the same reasons that caused the other firms to rise too. Just like the others, gross margins are very negative, and QUBT revenues continue to be minimal ($61,000 in Q2 2025).

   
   

Financial Metrics

Ticker	Share Price ($)	1Y Return	Market Cap	Enterprise Value	P/E	Revenues (TTM)	EBITDA	Price/Sales
IonQ	70.41	812.05%	21.58B	21.06B	N/A	52.37M	-339.34M	290.92
RGTI	28.52	3,399.39%	8.02B	7.60B	N/A	7.92M	-70.06M	779.10
QBTS	26.88	2700%	8.22B	7.44B	N/A	22.27M	-77.35M	276.02
QUBT	23.27	3,150%	2.93B	2.59B	N/A	263k	-28.84M	8330

Valuation: Are the Prices Justified?

From a fundamental perspective: No way! These companies are nowhere near profitable (yet), with a median EBITDA value of -$73.7 million and negative free cash values Q-on-Q. The median Price to Sales Ratio is $535. A high P/S ratio suggests investors are paying $535 for each dollar of a company's revenue. However, a high P/S ratio is justified for growth tech, but the fact that no company is generating positive income should raise concerns about the price.

But fundamentals don't price in one thing: Opportunity. It's clear that investors are not pricing in financial performance; these stocks are driven purely by strategic value - IPs, talent, government attention, exponential growth, and the potential to change the world. But at the end of the day, it's highly speculative and is prone to massive risks.

Risks

1. Commercial Viability and Moat Erosion

   It is unclear if and when any quantum hardware or software business will successfully translate technical prowess into viable, sustainable business models. Developments in classical computing could also shut the "quantum advantage" window, delaying or potentially avoiding the necessity for quantum technologies for most sectors.

2. Competitive Intensity and Market Entry Risks

   The quantum field is subject to intense competition from large incumbents (e.g., Google, Amazon, Microsoft); a massive breakthrough by one of these giants could render small players obsolete.

3. Long Path to Revenue and Profitability

   Quantum Computing is expensive, and the R&D is immense. If it takes too long, public market patients will dwindle, and funding may wear thin.

4. Market and Valuation Corrections

   Due to the high multiples of the sector and speculation funds, any adverse event, such as a technical milestone setback, a negative industry report, or a technology bear market, can trigger sudden, extreme corrections in quantum stocks.

Catalysts for Growth

1. Quantum Advantage in Real-World Applications

   If QQ becomes commercially viable, meaning error-free qubits and no decoherence, it could redefine the industry overnight. In fact, each breakthrough has historically driven the value of these companies.

2. Major Strategic Acquisitions

   If a Big Tech or sovereign wealth fund were to come in and buy a quantum hardware or software start-up, the sector would be bound to witness a broad re-rating higher due to more heightened "take-out" multiples and increased perceived value of rare patents and talent.

3. AI-Quantum Synergy “Wins”

   Real-world evidence demonstrates that integrating quantum computing with enhanced AI model performance or training larger AI models can spark a new wave of industry-wide investment and market excitement.

Key Takeaways

There's no doubt that once QQ succeeds and is commercialised, it will change the world. But right now, QQ remains a “big if, but enormous when” proposition. If you're an investor, it's best to think about the long-term play. QQ is extremely volatile right now, and we recommend holding before you buy. Coupled with a potential AI bubble, a significant market correction is bound to happen, and this sector will most likely drop due to reduced investor confidence; however, that will be the perfect time to enter the QQ space.

Disclaimer: This report is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. The analysis and opinions expressed are based on publicly available information believed to be reliable at the time of writing, but may be subject to change without notice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions. The author assumes no liability for any loss arising from reliance on this material.