Quantum computing stocks are popular (and very hot) at the moment. In recent weeks, stocks such as Rigetti Computing, IonQ, and D-Wave Quantum have been some of the most bought shares on Hargreaves Lansdown.
Should I follow the crowd and buy these explosive growth stocks for my Stocks and Shares ISA? Let’s discuss.
Quantum computing explained
Quantum computing’s an emerging field of computer science that harnesses the power of quantum mechanics to solve problems far beyond the ability of regular computers. Here, computations that might take a traditional computer thousands of years to complete can potentially be performed in a matter of minutes.
While traditional computers rely on binary bits (zeros and ones) to store and process data, quantum computers use quantum bits, or ‘qubits’, in superposition to encode more data at once. A qubit can behave like a binary bit and store either a zero or a one, but it can also be a weighted combination of zero and one at the same time.
When combined, qubits in superposition can scale exponentially. For example, two qubits can compute with four pieces of information, while four can compute with sixteen – all of which means significantly faster computing.
Why are quantum computing stocks hot?
Quantum computing isn’t a new technology. It’s actually been around since the 1980s. However recently, several Big Tech companies have gotten involved and this is one reason smaller quantum computing stocks are flying.
One tech giant that’s active in the space is Alphabet (NASDAQ: GOOG) (Google), which just unveiled a new quantum computing chip called ‘Willow’. According to the company, it only takes five minutes to solve a problem that would currently take the world’s fastest supercomputers 10 ‘septillion’ years to complete.
Another’s Amazon. It recently launched a new programme to help businesses get ready for quantum computing.
Should I invest?
There’s no doubt that quantum computing looks exciting. Today, companies like Rigetti and IonQ are rolling out some very powerful technology.
But to be honest, valuations across the industry look a little crazy to me right now. Some of these stocks have risen more than 1,000% over the last few months and now trade at insanely high multiples.
In the table below, I’ve put the price-to-sales ratios of four popular quantum computing stocks. For reference, the price-to-sales ratio on Nvidia‘s about 30 today.
| Stock | Market cap | 2025 revenue forecast | Price-to-sales ratio |
| Quantum Computing | $2.1bn | $1.5m | 1,400 |
| Rigetti Computing | $4.6bn | $16.2m | 284 |
| D-Wave Quantum | $2.7bn | $14.8m | 182 |
| IonQ | $10.3bn | $83.5m | 123 |
These valuations look unsustainable, in my view. This looks like a classic bubble to me.
I’ll stick with Big Tech
Given the high valuations, I think it’s far safer to stick with my holding in Alphabet for exposure to the technology. Its goal is to unlock the full potential of quantum computing by developing a large-scale computer capable of complex, error-corrected computations.
Alphabet stock may not explode higher in the same way that many smaller quantum computing stocks are today. But at the same time, it’s unlikely to crash spectacularly if investor sentiment towards quantum computing cools.
That’s because it’s a diversified business. It’s also very profitable and has a ton of cash flow (unlike most smaller quantum computing companies).
Of course, Alphabet shares do have their risks. One is search being disrupted by generative AI.
With the shares trading on a price-to-earnings (P/E) ratio of 21 (that’s price-to-earnings not price-to-sales) however, I like the risk/reward set-up.
This post was originally published on Motley Fool
