Quantum Computing Stocks IonQ, Rigetti Computing, and D-Wave Quantum Sent Shockwaves Through Wall Street With This $857 Million Warning

Although artificial intelligence (AI) is the hottest trend and largest addressable opportunity since the advent and proliferation of the internet in the mid-1990s, it's not the only innovation stirring investor interest and leading to eye-popping returns on Wall Street.

By one estimate, quantum computing can create up to $1 trillion in global economic value by 2035. This enormous addressable market has been the fuel behind the parabolic gains we've witnessed in pure-play quantum computing stocks IonQ (NYSE: IONQ), Rigetti Computing (NASDAQ: RGTI), and D-Wave Quantum (NYSE: QBTS).

We've also observed this trio of quantum computing stocks rallying from U.S. government contract wins and/or funding.

Image source: Getty Images.

But things may not be as perfect as their skyrocketing share prices over the last two years would suggest. Arguably, the biggest red flag comes from the insiders who know IonQ, Rigetti, and D-Wave best.

Insiders are telling a worrisome tale with their actions

An insider is a high-ranking executive, board member, or beneficial owner of at least 10% of a company's outstanding shares who may possess non-public information.

By law, insiders are required to file any transactions of their company's stock, including the exercising of option contracts, within two business days. These Form 4 filings are also made for the sake of investor transparency.

Since quantum computing stocks really burst onto the scene two years ago, we've witnessed a decisive tilt in insider trading activity. Specifically, Form 4s show an abundance of net selling by insiders since June 18, 2024:

• IonQ: $454.1 million in net selling
• Rigetti Computing: $71.5 million in net selling
• D-Wave Quantum: $331.1 million in net selling

Collectively, the most in-the-know individuals at the three hottest pure-play quantum computing companies have sold nearly $857 million of their stock over the trailing two years.

There is, however, a caveat to the above data that should be taken into consideration. Most executives and board members receive a significant portion of their compensation in stock and options. Insider selling to cover federal and/or state tax liability isn't something that investors should be overly concerned about.

But while there are several reasons for insiders to sell shares of their company, not all of which are inherently nefarious, there's only one reason for insiders to buy shares of their company's stock: the expectation that it'll rise.

Looking back over the same trailing two-year timeline, insider buying has been virtually nonexistent. Though IonQ has had roughly $2.25 million in cumulative insider purchases, D-Wave Quantum's insider buying tallies just $1,795 over the last two years, while Rigetti doesn't have a single insider purchase.

One possible reason insiders are keeping their distance is the otherworldly valuations of quantum computing stocks. Though these companies offer breakneck growth potential in the coming years, their price-to-sales ratios are firmly in bubble territory, based on what history tells us.

Furthermore, game-changing technologies have a terrible early stage track record since the mid-1990s. Investors commonly overestimate how quickly innovations will be adopted and/or optimized by consumers and businesses. Quantum computing is still incredibly early in its adoption phase, and we're nowhere close to seeing businesses deploy quantum solutions to boost their sales and profits.

If insiders aren't buying, why should everyday investors?

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.