Could Investing $10,000 in D-Wave Quantum Make You a Millionaire?

To say the advent of quantum computing has caught investors' attention would be a considerable understatement. It's captivated them. And understandably so.

Quantum computers promise to tackle tasks that were unthinkable just a few years ago. Work that would take modern-day artificial intelligence (AI) data centers decades to complete can be done by quantum platforms in a matter of minutes. "Revolutionary" is a more fitting description of the young technology.

This, of course, has prompted investors to seek the best way to plug into the revolution. So far, they've found pure plays like Rigetti Computing, IonQ, and D-Wave Quantum (NYSE: QBTS), although powerhouses like IBM and Alphabet are in the business as well.

But, given the apparent potential growth based on the current buzz, there may be enough revenue to go around for all of them. Or maybe not. Only time will tell.

With that as the backdrop, where does D-Wave Quantum fit into the picture? Is there any chance a modest investment in it today could grow to seven figures? Or, has the market priced in far more hype than is merited?

What's D-Wave Quantum, and where does it fit in?

Quantum computing is the use of subatomic particles as the basis for a computing platform. Whereas conventional computers are limited by the fact that the digital data they handle is ultimately boiled down to the ones and zeros (or binary code), the quantum particles found within quantum computing platforms can have a nearly infinite number of nearly simultaneous values at any given time. This makes this technology exponentially faster than any mainstream alternative currently in use, which, of course, has enormous implications for fields such as artificial intelligence, drug discovery, and cybersecurity, among others.

Even among quantum computing developers, though, D-Wave is unique. Its specialty is annealing, meaning its systems are purpose-built specifically for optimization of complex challenges like logistics, financial modeling, and the aforementioned drug discovery. The approach isn't necessarily limiting or superior, though -- the world needs all sorts of quantum computing solutions to solve a wide range of problems.

The world's already leaning on D-Wave Quantum to solve problems, in fact, even if on a relatively modest scale. The company reported $3.7 million in revenue last quarter, doubling the year-earlier comparison. Analysts are looking for a similar number for the quarter currently underway, with strong growth in the cards at least for the coming year.

This progress may still only scratch the surface of the opportunity, however. An outlook from Precedence Research suggests the worldwide quantum computing market is poised to grow at an average annualized pace of more than 30% through 2034, aligning with predictions from IDTechEx and BCC Research.

Two things standing in D-Wave stock's way

There's just one little problem for investors expecting big things from D-Wave based on the industry's tailwind, though. Well... two, actually.

Getting straight to the point, there are too many overvalued quantum computing companies -- including D-Wave -- chasing too few dollars.

The industry's growth rate from here is admittedly impressive. Just bear in mind that this expected growth is being compared to nearly nothing. Precedence's outlook only calls for about $16 billion worth of quantum computing revenue in 2034, more or less aligning with projections from BCC and IDTechEx. Global Market Insights offers a slightly more optimistic expectation, but only slightly, suggesting the quantum computing business will only be worth $65 billion by 2032.

Connect the dots -- although quantum computing is powerful, it's not a solution that's overwhelmingly needed.

Given this, with a current market cap of nearly $10 billion, it's difficult to see D-Wave Quantum building any more net shareholder value, even if it does win its fair share of the industry's impending growth to beef up its top line. There's no assurance that more revenue will translate into actual profits at the end of this time frame, or any time frame, for that matter.

Image source: Getty Images.

And the second stumbling block? The sheer amount of competition vying for the fairly small number of dollars up for grabs within the quantum computing space. The threats aren't just smaller rivals like Rigetti or IonQ either, both of which will face the same liquidity challenges that D-Wave will as well.

The bigger existential threats to D-Wave are deeper-pocketed competitors like the aforementioned IBM or Alphabet's Google, both of which can afford to spend more -- or even lose money -- on their quantum projects simply because each has other profit centers to lean on. That's not the case with D-Wave or its similarly sized peers.

The lack of a competitive moat, of course, poses a significant risk for QBTS shareholders. The company may feel forced to spend money it doesn't really have in order to remain ahead of the competition, it's not well-positioned to beat.

Hype tends to trump reason, but only for a while

And the world's just not looking past the hype to recognize that the fiscal math doesn't make sense here? Yes and no, but mostly no.

As crazy as it seems, it's not like we haven't seen it plenty before. Take GoPro (NASDAQ: GPRO) as an example. It was a market darling when it went public back in June 2014, eventually soaring to a market cap of nearly $12 billion shortly thereafter, just because action cameras were a hot new idea, and GoPros were the best in their category.

The stock's now a fraction of its former self though, because the world eventually realized it doesn't actually need all that many action cameras. Other recent sources of short-lived bullish manias include 3D printing, meal kits, and cannabis. There's a market for all of them... just not a market big enough to justify the buzz and hype implied at their peak.

So in answer to the initial question, no, a $10,000 investment in D-Wave isn't likely to make you a millionaire. There are far more promising and lower-risk stocks out there, however, that could do the job.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, International Business Machines, and IonQ. The Motley Fool has a disclosure policy.