Should You Forget IonQ and Buy These 2 Quantum Computing Stocks Instead?

IonQ (NYSE: IONQ) may be a leading pure-play name in the quantum computing race, but it certainly isn't the only promising one. D-Wave Quantum (NASDAQ: QBTS) and Rigetti Computing (NASDAQ: RGTI) are also among the stronger picks in the space, and each brings distinctive technologies and growth opportunities to the table.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Could these two quantum stocks be better buys than IonQ right now?

Commercial adoption is picking up for D-Wave's systems

D-Wave's biggest advantage is its focus on quantum annealing, a niche approach to the technology that is largely useful only for solving optimization and sampling problems. However, those types of problems come up frequently in a host of applications, from managing supply chains and logistics to materials science and chemistry. Customer adoption of its systems has been picking up, with more companies using D-Wave's quantum technology to improve their operations.

That's starting to show up in its financial results.

In August, the company delivered its Q2 numbers and reported that production applications accounted for a growing share of its quantum cloud computing revenue. It also expanded its commercial relationships during the quarter, including an agreement with AT&T to broaden the use of quantum computing in network operations.

Plus, with its acquisition of Quantum Circuits, the company has been developing a dual-platform strategy that combines its annealing approach with a more common gate-model quantum computing approach. That's important because gate-model systems have the potential to address a much broader range of problems in computing.

With that, D-Wave may appeal more to investors than IonQ. In fact, its technology is already being used in production applications, helping businesses optimize their operations. That gives it a more immediate path to monetization.

Of course, there are risks in owning a stock like D-Wave. Quantum annealing has its value, but it doesn't address every problem that general-purpose quantum computers could potentially solve. D-Wave is also still at an early stage of its journey toward a commercially viable product, so adoption still needs to translate into more sustainable revenue growth and profitability.

On top of that, with the stock trading at a price-to-sales (P/S) ratio of around 300, its valuation prices in a whole lot of hoped-for future growth. If the company doesn't deliver on those expectations, the stock could decline dramatically.

Still, the majority of Wall Street analysts covering the stock rate it a buy, with an average 12-month target price of $33.83, implying about 226% upside.

Meanwhile, another quantum stock is taking a unique approach to scaling quantum computers.

A new generation of scalable quantum computers is Rigetti's focus

Rigetti offers a different opportunity: It's using superconducting qubits to build powerful, general-purpose quantum computers. It's also developing full-stack technology, spanning hardware, software, and the infrastructure needed to run quantum computers.

The company has also made meaningful progress expanding its commercial and research partnerships. In July, Rigetti announced an expanded collaboration with Hewlett Packard Enterprise and the Pittsburgh Supercomputing Center. The project involves deploying Rigetti's Novera quantum system, allowing researchers to explore how quantum processors can work alongside traditional supercomputers.

Rigetti is also working to expand its international footprint, including plans to invest in the U.K. and deliver systems to research institutions. These relationships could help drive adoption of its technology and create opportunities for future commercial deals.

If superconducting qubits become the leading approach to scaling up quantum computers to a commercially useful size, Rigetti could be one of the biggest beneficiaries. Its chiplet-based design, in-house manufacturing, and federal government backing also make it an interesting way to invest in the next generation of quantum hardware.

However, Rigetti's path to potential success will depend on improving processor performance, scaling its quantum systems without compromising quality, and securing commercial demand. As a result, the company faces significant execution risk.

Its valuation also is approaching 300 times sales, so it, too, will have to deliver on extremely high expectations to generate the sales and profits necessary to justify its current share price and produce additional returns. Still, like D-Wave, the majority of analysts covering Rigetti rate the stock a buy, with an average 12-month target price of $27.69, implying about 183% upside.

Which quantum stock better fits which kind of investor?

Each company offers a different way to bet on how quantum computing will evolve, and each has its own path to growth. D-Wave stands out as an investment due to the progress it has already made in commercial applications, while Rigetti offers an approach to building scalable quantum computing hardware that could be useful in a broader array of applications.

For investors who prefer to own companies with nearer-term commercial traction, D-Wave looks like the stronger fit. Rigetti is the higher-risk, higher-reward pick, since its success will depend on scaling superconducting systems. Both come with significant risks, but investors seeking names beyond IonQ may find their technologies and growth prospects worth considering.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hewlett Packard Enterprise and IonQ. The Motley Fool has a disclosure policy.