Nvidia (NVDA -3.00%) CEO Jensen Huang recently predicted it could take another 15 to 30 years to bring “very useful quantum computers” to the market. He also claimed those systems would require a million more quantum bits (qubits) than they have today.
Huang’s cautious comments caused two popular quantum computing stocks, IonQ (IONQ 6.88%) and Rigetti Computing (RGTI -11.06%), to plunge 39% and 45%, respectively, on Jan. 8. Let’s see why that happened -- and if IonQ and Rigetti are still worthwhile investments after those precipitous declines.
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Why did Huang’s comments burst the quantum bubble?
Traditional computers store their data in binary bits of zeros and ones. Quantum processing units (QPUs) can store zeros and ones simultaneously in qubits, which enables them to process data much faster than traditional computers.
But quantum computers are much larger and pricier than their binary counterparts, and they tend to produce more errors with their rapid calculations. That’s why they’re still mainly used by universities, research institutions, and government agencies for niche calculations instead of more practical applications for mainstream companies.
Therefore, Huang’s prediction that quantum computers won’t go mainstream for another 15 to 30 years sounds reasonable. It took Nvidia about two decades for its gaming and professional visualization GPUs to evolve into AI accelerators for data centers.
However, nascent quantum computing companies like IonQ and Rigetti -- which both went public by merging with special purpose acquisition companies (SPACs) -- generated a lot of buzz with their bold near-term predictions for the market. Many investors scooped up their stocks, which propelled their valuations to meme stock levels. That’s why their stocks plunged after Huang’s latest comments.
How expensive were IonQ and Rigetti?
IonQ develops quantum computing systems for government agencies and universities. It also provides its quantum computing power as a cloud-based service. To scale up its systems, it’s been developing a “trapped ion” technology which could eventually shrink the width of a QPU from a few feet to few inches. That could help it scale up its systems at a faster and cheaper rate while reducing their overall errors, but those efforts suffered a setback after its co-founder and chief scientist Chris Monroe stepped down in 2023.
Rigetti designs and manufactures QPUs, and its Forest cloud platform enables developers to write their own quantum algorithms with its systems. In late 2024, it launched its Novera QPU -- a 9-qubit commercial version of its own quantum computer which costs $900,000. It also recently also recently deployed its first 84-qubit Ankaa-3 system, which can detect more than 99% of processing errors, and it aims to deploy a more powerful 100-qubit system with an even higher error detection rate this year.
But Rigetti also lost one of its visionary leaders after its public debut. Its founder Chad Rigetti unexpectedly stepped down as its president, CEO, and director in Dec. 2022.
IonQ and Rigetti are both generating consistent revenues, but they’re both unprofitable and trade at nosebleed valuations. Even after its latest decline, IonQ has an enterprise value of $6.3 billion -- which is 75 times the $83 million in revenue it’s expected to generate in 2025. Rigetti still has an enterprise value of $2.7 billion, which is 171 times higher than its projected revenue of $16 million for 2025. Therefore, it isn’t too surprising that a single cautious comment from Nvidia’s CEO crushed both stocks.
Should investors buy IonQ and Rigetti today?
Both companies are still growing rapidly. From 2023 to 2026, analysts expect IonQ’s revenue to grow at a compound annual growth rate (CAGR) of 89% to $145 million. They expect Rigetti’s revenue to grow at a CAGR of 43% to $35 million.
But IonQ and Rigetti already trade at 43 and 77 times those rosy estimates for 2026 -- which are pinned to a bullish outlook for the broader quantum computing market. If the quantum computing market grows at a much slower than expected rate, those analysts will rein in their long-term estimates and their valuations will collapse.
Therefore, I wouldn’t touch IonQ and Rigetti after Jensen Huang’s latest comments. Huang gave investors a great reason to take profits in IonQ and Rigetti after their latest rallies, so they’re definitely falling knives and not contrarian buys.
