Up 1,460% Since 2024, Is It Too Late to Buy This Quantum Computing Leader?

While artificial intelligence (AI) is all the rage in the tech investing realm right now, quantum computing is the next emerging technology. Quantum computing could change what technologies are feasible, including some aspects of AI. If it can successfully be developed to commercial viability, this technology will take the world by storm, and investors will want to be positioned to take advantage of its growth years in advance of when it actually occurs, as the market will price huge anticipated growth into shares as that hoped-for success gets closer.

Indeed, many quantum computing stocks have already experienced huge run-ups, including D-Wave Quantum (NYSE: QBTS). Since the start of 2024, D-Wave's stock is up an incredible 1,460%. While that sounds like an impressive gain (and it is), at its peak last fall, D-Wave was up nearly 5,000%. This makes me wonder if the stock could return to that peak in the near future.

Is it too late to buy D-Wave Quantum's stock? Or is now a perfect time?

Image source: Getty Images.

D-Wave is taking a different approach to quantum computing

Most of the companies attempting to develop quantum computers are focused on relatively general-purpose machines. D-Wave Quantum isn't. It's working on a technology known as quantum annealing, which is designed to find the lowest or nearly the lowest energy states in a system. This makes it perfect for finding solutions for optimization problems like those that come up in logistic networks and AI inference. While the variety of tasks for which a quantum annealing system would be suitable is limited compared to what a general-purpose quantum computer would be useful for, D-Wave's technology could be applied to some of the areas where quantum computing is expected to be brought to bear first.

In fact, D-Wave has already used its systems to help multiple businesses optimize resources, build production schedules, and manage logistics. While these are fairly niche applications, they could be deployed in wider settings as the capabilities of the company's hardware improve.

D-Wave is one of the most practical ways to invest in quantum computing, as its products are aimed at practical applications. This makes me a long-term bull on D-Wave, but it still has a long way to go to become a viable company.

Right now, most of D-Wave's revenue comes from research partnerships and one-off early-stage product sales. In Q4, its top line totaled $2.7 million. However, its operating expenses totaled nearly $37 million -- it's burning through cash quickly. Fortunately, D-Wave has over $600 million in cash and equivalents on its books, so it can survive for a while at this loss rate.

D-Wave closed $12.4 million in bookings during Q4, up 471% from Q3's bookings. This shows that there is growing excitement about the company, but it's still not generating remotely enough business to break even. And with a market cap of around $5.5 billion, it trades at a lofty price-to-sales ratio of around 185. That's a lot of hoped-for future growth already priced into the stock.

I think D-Wave is an excellent long-shot investment. Still, investors should not invest more than they are willing to lose in it. It could become worthless just as easily as it could deliver incredible returns.

Keithen Drury 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.