Key Points
- RGTI, IONQ, and QBTS are the quantum trio that have skyrocketed in recent months.
- I wouldn’t chase the latest melt-up and would instead concentrate on the pullback risks rather than the upside potential in a bull-case scenario.
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The quantum computing stocks have been on an incredible run, and while there’s been no shortage of volatility and bear market moments on the road higher, the quantum trade, which consists of top stocks such asRigetti Computing(NASDAQ:RGTI),IonQ(NASDAQ:IONQ), andD-Wave(NASDAQ:QBTS), has been melting up in vicious fashion. Indeed, the quantum trade is perhaps the only thing hotter than the AI plays right now. But time will tell if the tables turn against the top quantum computing stocks again, as they have numerous times in the past.
In a tough Thursday of tech trading, shares of RGTI rocketed 9% higher, while IONQ and QBTS went on to surge 4.3% and 2.4%, respectively. Indeed, the melt-up in quantum stocks is becoming difficult to avoid, and while there might still be room to run, those who get in with the hopes of riding the name higher should also be prepared for what happens once the next inevitable rollover happens.
Trading quantum stocks can be quite tricky unless you’re a seasoned pro. However, if you can handle a 50-70% hit and see yourself buying more into the next dip, perhaps nibbling on a few shares of your favorite stocks to play the quantum leap can make a lot of sense.
Indeed, some investors may have already moved on from the AI trade to hotter things. But the big question is how long the quantum bull run will last. As always, it’s impossible to tell at this juncture, especially as valuations get a tad ahead of themselves while Wall Street analyst price targets are exceeded.
The quantum leap in quantum computing stocks has been euphoric
After the latest surge, RGTI shares have gained 400% in six months while IONQ has risen 200%, with QBTS gaining around 387%. These are some serious multi-bagger gains that have propelled quantum pure-plays to center stage. And with market caps now comfortably in the double-digits, with IonQ boasting a $25.5 billion valuation, at the time of this writing, the quantum plays are starting to attract some real attention. With names like Rigetti gaining close to 3,000% in two years, questions linger as to whether the quantum trio has any such gas left in the tank to cause another 10x.
Personally, I think asking which is the next 10x is the wrong way to go about betting on the names. Arguably, investors have already missed such a run. And while a plunge could always open the door for a second chance to buy in at more reasonable prices, I think the best way to proceed with the quantum stocks is to buy them into dips. Indeed, I’ve been quite bullish on the quantum stocks over the past year.
However, after more than doubling in a month, I just have to change my tune on the names. They’re amazing firms with different takes on the emerging technology. But valuations have gotten out of hand, and the risks for a steep pullback over the near-term are real. Though nobody knows which name will be a so-called “10x” stock, I do think that IonQ stands out as the most intriguing of the batch.
The quantum names look too risky to buy. Of the trio, IonQ looks most attractive on a pullback.
Of course, the trio of quantum stocks is bound to move together, so until a correction hits, I’ll be steering clear of the group. Though, I will be watching the names as volatility takes things up a few notches after the latest melt-up. At this juncture, I think IonQ is the name that long-term investors should look to build a position in, preferably after a pullback.
It’s a larger firm that has been gaining traction in trapped ion quantum computing, a technology that I believe holds the most promise for future commercialization. As for 10x hopes, I’d encourage enthusiastic investors to check their expectations of euphoric near-term gains at the door, as I do see IonQ as a name best held for the extremely long haul (think the next 10 years, as quantum really starts to emerge). Additionally, more focus should be placed on the downside risks, rather than upside potential, especially since the most explosive moves are already in the books.
In short, the quantum companies have serious potential over the long run, but they look overbought in the near term. Perhaps the best way to play it is to wait for the next correction.
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