Why Quantum Computing Stocks Rocketed Higher on Thursday

Not for the first time in their relatively brief existences, quantum computing stocks shot well higher in value on Thursday. That wasn't due to any fresh innovation, discovery, or major business move. Rather, it seemed to have more to do with some grand pronouncements by a single quantum company executive.

Nevertheless, as a writer, I can confirm that words have power, and these were powerful enough to lift the sector as a whole. Industry standard-bearers Quantum Computing (NASDAQ: QUBT), Rigetti Computing (NASDAQ: RGTI), and D-Wave Quantum (NYSE: QBTS) all saw their share prices inflate at double-digit rates. The stocks rose a respective 15%, 24%, and 26% on the day.

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The king of quantum?

Those market-moving words came from the leader of one of their peers, IonQ (NYSE: IONQ). That morning, Barron's published an interview with the company's CEO, Niccolo de Masi, in which he waxed extremely bullish about the prospects for his business. This was clearly taken by the article's readers as likely prosperity for the wider quantum space.

Image source: Getty Images.

De Masi is clearly not the shy and publicity-adverse type of corporate leader, as he made a series of grand pronouncements about IonQ.

In his eyes, the company is the quantum sector equivalent of graphics processing unit (GPU) king Nvidia or advanced processor specialist Broadcom. As such, IonQ's ultimate prominence and power will be imitated by businesses hoping to catch some of its magic.

In fact, added the executive, "they have always copied and followed us."

That isn't really accurate, as the varied quantum companies currently traded on the stock market are following different paths to hoped-for success. In IonQ's case, it's a "full-stack" business, aiming to provide hardware, the software that runs on it, and applications for control and access.

In a way, though, Quantum Computing, Rigetti, and D-Wave are followers. IonQ was among the first pure-play quantum companies to become publicly traded. That pedigree is a factor that has helped drive its market cap to over $11 billion at present. That dwarfs its three peers, as the most richly capitalized of the trio -- D-Wave -- is currently valued by investors at under $5.6 billion.

Rivers of red ink

Nevertheless, investors should always be wary of hype, especially when applied to an early-stage industry struggling to get on its financial feet -- like quantum.

While the technology has indisputably immense potential, getting a quantum business to the point where it's efficient and profitable is quite the challenge. None of the prominent quantum companies -- yes, including IonQ -- has yet to stem their often very deep net losses.

There are potentially significant catalysts on the horizon. One that could change the landscape dramatically is Congress's National Quantum Initiative Reauthorization Act.

As the name implies, this would restart a federal program aimed at boosting quantum, with public funding for businesses actively involved in such work. Capital for cash-hungry companies on the cutting-edge of new technologies is almost always scarce; passing the act into law would alleviate that nagging and persistent headache.

I have to emphasize here that such industry-boosting factors are only potential at this point, not reality. And that goes double for any talk of a single quantum company or a clutch of them becoming the new Nvidia or Broadcom.

Both of these successful enterprises are the products of years of patient business development and often heavy research and development expenditure. Neither blasted into the world suddenly as cash-gushing winners.

Spread the wealth

At this point, it's hard to place bets on which quantum company, or companies, will pull ahead with offerings irresistible to customers thirsty for exponential increases in computing power.

Given that, it's probably a good move for quantum bulls to spread out their investments among the leading stocks in the space. I feel all of the aforementioned titles can potentially leverage the technology into robust profits eventually -- and yes, that includes IonQ, all hype and hot air aside.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.