Why D-Wave Quantum Stock Plummeted 20% This Week
Key Points
Fears of an artificial intelligence (AI) and tech bubble spiked this week.
The broader economy continues to show signs of slowing.
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Shares of D-Wave Quantum (NYSE: QBTS) fell this week as part of a broader sell-off in tech, finishing down 20.2%. While the Nasdaq-100 finished down just 0.2%, the tech-heavy index was down as much as 2.1% earlier in the week.
Fears of an artificial intelligence (AI) bubble intensified this week amid mounting signs of economic weakness, hammering stocks with stretched valuations, like D-Wave's.
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Fears mount on Wall Street
For months, tech stocks have surged on headlines of billion-dollar AI infrastructure deals and promises of revolutionary breakthroughs. But investors are starting to get antsy, demanding evidence of actual returns on the staggering capital expenditures pouring into AI and quantum computing.
This comes at a time when broader economic anxieties are escalating, forcing investors to reassess just how much risk they are willing to take on and how much of a premium they are willing to pay.
Image source: Getty Images.
There is a lot of hype around quantum stocks
D-Wave stock trades with a hefty premium, and it's hard to see its valuation as anything other than extreme. Shares trade with a price-to-sales ratio (P/S) of 282. Investors have piled into D-Wave, attracted by the company's claims that its annealing technology delivers value today while gate-based quantum computing remains years away.
But real revolutionary application of this technology -- the kind that would justify current valuations -- is at least years, if not decades, away. I would avoid D-Wave stock.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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