With its stock price skyrocketing an astonishing 3,600% in the past year, D-Wave Quantum ( QBTS 23.29%) has likely created a new wave of millionaires. Investors are flocking to quantum-focused equities due to their potential to disrupt industries in the long run. But is this surge driven by solid fundamentals or just market excitement?
Let’s take a closer look to determine whether D-Wave Quantum still offers millionaire-making potential or if it’s wiser to remain cautious for now.
What’s fueling this dramatic surge?
D-Wave Quantum entered the public markets via a merger with a special purpose acquisition company in 2022, but its shares didn’t start to gain momentum until late 2024. That’s when tech giant Alphabet unveiled its advanced quantum chip, Willow, signaling to many that commercial-scale quantum computing could be on the horizon.
In the months that followed, the sector saw additional progress as customers placed orders for quantum equipment from D-Wave and its competitors. The company’s revenue for the second quarter climbed 42% year over year to $3.1 million, thanks to deals with both research organizations and business clients interested in its quantum technology.
However, while recent equipment sales are promising, they don’t guarantee that D-Wave is close to building a sustainable business. In fact, D-Wave’s first quantum computer was sold to Lockheed Martin back in 2011—over 14 years ago. There’s no certainty that today’s sales are any more than isolated, experimental purchases like those in the past. Meanwhile, the company’s financial performance remains a concern.
D-Wave Quantum’s cash burn is significant
Although D-Wave generated $3.1 million in revenue, this figure pales in comparison to the $28.5 million it spent on operating costs, much of which was allocated to research and development . To cover its ongoing expenses, D-Wave has relied on issuing new shares, raising $400 million in fresh capital through equity offerings in July alone.
The number of D-Wave shares in circulation has soared since its 2022 debut, and investors should anticipate further dilution going forward.
QBTS Shares Outstanding data by YCharts
While raising capital through equity can help a company survive and fund research that may drive future value, it also reduces the ownership percentage of existing shareholders and their share of future profits, which can weigh on stock performance. Since widespread adoption of quantum technology could still be many years away, this presents a long-term challenge for those who invested early in D-Wave.
D-Wave’s valuation is also extremely lofty. With a price-to-sales ratio of 336, its shares are trading at a massive premium compared to the S&P 500 average of just 3.31. While some investors may justify this premium given quantum computing’s potential, much of the anticipated growth is already reflected in the current price.
Could D-Wave Quantum make you a millionaire?
Image source: Getty Images.
After a staggering 3,600% rise in just one year, D-Wave Quantum certainly has the potential to create millionaires under the right circumstances. The market is always searching for the next breakthrough and often overlooks fundamentals in favor of excitement. However, in the long run, financial realities tend to prevail. While D-Wave Quantum may have a promising future, it will need to significantly expand its operations before it can be considered a solid long-term investment.
