Why D-Wave Quantum Stock Just Crashed
Key Points
The Trump Administration has issued two executive orders bolstering quantum computing research.
One has a deadline of 2028 -- the other 2031.
It's not at all certain D-Wave will last that long.
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D-Wave Quantum (NYSE: QBTS) stock jumped 2.3% on Tuesday as momentum investors swarmed to buy the stock in the wake of a Trump Administration order promoting the development of quantum computing. StreetInsider.com reported massive buying of call options in D-Wave stock yesterday -- 5.3 calls purchased for every put -- indicating traders were heavily bullish on the stock.
But it didn't last. As of 2:40 p.m. ET, D-Wave stock has given up all yesterday's gains and is crashing 8.9% today.
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Image source: Getty Images.
Some good news for D-Wave?
As NBC reports, President Trump on Monday signed an order "to build a powerful quantum computer for scientific research," aiming to have the device operational before he leaves office in 2029.
Further out, the President called for protecting government computer systems from cyberattacks made more powerful by the use of quantum computers, using other quantum computers to build "post-quantum cryptography" by 2030 or 2031.
And I must say, all of this sounds pretty bullish for a leading quantum computing stock like D-Wave, and a good reason for investors to be bidding up D-Wave stock yesterday.
No bad news for D-Wave stock
The other good news is that there's no specific bad news driving the sell-off today. It's just that all the buying yesterday may have gone a bit overboard, and the lack of any more good news like Monday's meant day-traders couldn't sustain the momentum.
Nor may it for a while.
2028? 2030? 2031? These are some long-range targets, even stretching into a new Presidential administration, which may or may not sustain government support for quantum computing efforts. Meanwhile, analysts polled by S&P Global Market Intelligence expect D-Wave to remain unprofitable the whole time -- through at least 2030.
Even with the prospect of government subsidies, D-Wave stock remains a risky bet.
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Rich Smith 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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