All it took to derail a rally that had sent shares of pure-play quantum computing stocks soaring was a single comment from a tech CEO. When Nvidia's Jensen Huang suggested that a useful quantum computer was likely decades away, shares of IonQ (IONQ 5.92%) and D-Wave Quantum (QBTS 23.50%) fell off a cliff. As of midday Tuesday, both stocks were down at least 45% from their recent highs.

Quantum computing is a technology that has tremendous long-term potential, but no one has yet cracked the code on how to successfully apply it to real-world problems. By taking advantage of bizarre quantum properties, quantum computers can complete certain types of computations exponentially faster than traditional supercomputers. So far, though, existing quantum computers have only been able to speed up calculations that have no practical applications.

If useful quantum computing is truly decades away, large tech companies with deep pockets are much more likely to still be around when the technology matures. Betting on IonQ or D-Wave is ultimately a bet that a breakthrough is right around the corner, the odds of which are vanishingly small.

A fanciful forecast

IonQ generates a small amount of revenue from various partnerships and deals, which totaled $12.4 million in the third quarter of 2024. The company sells various quantum computing systems, but these aren't used for solving real problems. In fact, IonQ noted in its third-quarter report that its recent deal with AstraZeneca was the first time the company had partnered for a production use case.

Following the stock's collapse, IonQ CEO Peter Chapman released a statement regarding the company's long-term prospects. Chapman noted that global quantum computing investments had reached $50 billion by the end of 2023 and expected IonQ to be profitable, with annual revenue approaching $1 billion, by 2030. Missing from the statement was any detail on how the company would achieve this.

IonQ will need to build a quantum computer that can solve real-world problems faster than traditional computers within the next few years to hit this forecast. That seems highly unlikely.

IBM, which has been working on quantum computing for decades, has set a timeline of "beyond 2033" for supercomputers that pair quantum computing with traditional computing to tackle real-world problems. How "quantum" these supercomputers will be is an open question.

IonQ is still valued at about $6 billion, an incredible price to pay for a company that's largely doing science experiments.

Narrow use cases

When Nvidia's Huang made his quantum computing comments, D-Wave CEO Alan Baratz shot back by saying he was "dead wrong." While Baratz acknowledged that universal quantum computers -- the kind theoretically capable of running any quantum algorithm -- may indeed be decades out, he noted that D-Wave's annealing quantum computers were already proving useful to businesses.

Annealing quantum computers are capable of solving a narrow set of optimization problems. A decade ago, researchers at Alphabet found that, for certain optimization problems, quantum computers from D-Wave managed to greatly outperform traditional computers. However, the researchers noted that: "[T]here is more work ahead to turn quantum enhanced optimization into a practical technology. The design of next generation annealers must facilitate the embedding of problems of practical relevance."

It's been 10 years, and D-Wave still generates almost no revenue from its quantum computers. The company produced revenue of just $6.5 million through the first nine months of 2024, a strong indication that its technology just isn't all that useful.

D-Wave is valued at more than $800 million. The company takes a different approach to quantum computing than its peers, but it still could be many years or decades before its quantum computers are useful enough to generate meaningful revenue and profit.

Avoid the hype

Quantum computing is an exciting technology, but it's a field that has progressed slowly for decades. There are no guarantees that quantum computers will ever be able to solve useful real-world problems faster than traditional supercomputers. If they do, it could be decades down the road.

The research that IonQ and D-Wave are doing is important to move quantum computing forward, but as investments, both stocks are incredibly risky.