Read this before you invest in quantum computing stocks!
I see a lot of investors “moving on” from the AI megatrend.
The recent news headlines are all about quantum computing.
“Is Quantum Computing the Next Big Tech Trend?”
“New quantum computer smashes ‘quantum supremacy’ record”
… and countless others touting quantum computing stocks that could make “early investors rich.”
But be careful. I think jumping head first into these stocks is risky.
Let me explain…
What is quantum computing?
The science behind quantum computing is mind-bending. In the simplest terms, it takes advantage of quantum mechanics to make computers 1,000X faster than they are today. It’s like jumping from the candle to the lightbulb.
If we ever achieve far-out goals like controlling the weather, colonizing Mars, or reversing human aging, quantum computing will likely be the driving force.
Who wouldn’t want to invest in this type of disruptive technology?
Here’s why investing in quantum computing stocks is risky…
There are several pure-play quantum computing stocks trading on the NYSE and Nasdaq:
- Quantum Computing Inc (QUBT)
- D-Wave Quantum (QBTS)
- Rigetti Computing Inc (RGTI)
- IONQ Inc (IONQ)
The problem: None of these is making real money from quantum computing today — and they probably won’t be anytime soon. While there’s been progress in quantum computing, the technology is still in its infancy.
If you want to make money in stocks, invest in great businesses profiting from a megatrend today.
Nvidia (NVDA) is a good example, a stock we first talked about in 2018. AI was hyped up. The ultimate buzzword. Of course, nothing like the level we’ve seen post-ChatGPT. Nonetheless, AI was the “mating call” for companies trying to attract investor dollars.
But here was the reality at the time:
Very few companies were actually building intelligent AI systems. I wrote about how venture capital firm MMC Ventures studied 2,830 AI startups. In 40% of cases, it found no evidence AI was an important part of their businesses.
You only needed to ask one simple question to weed out the fakes: What percentage of a company’s sales come from AI? Only a handful were making any money from this budding disruption. The one company with a booming AI business was Nvidia.
I see the same happening in the quantum computing industry. No one is even close to making money from this future technology.
What about Defiance Quantum ETF (QTUM)? Is it a good investment?
Not really. Don’t get me wrong, there are some great companies in the QTUM ETF. But it’s mostly big defense and tech stocks that aren’t actually focused on quantum computing.
AI stocks are a much better investment than quantum computing stocks
I hate to see investors rush into an underdeveloped corner of the market when we’ve got a perfectly good megatrend, right in its moneymaking sweet spot, staring us in the face.
The AI megatrend is nowhere near over!
Data center spending is expected to top $200 billion in 2025. And analysts expect the global capacity of hyperscale data centers to grow 3X over the next six years to meet the world’s AI needs.
Peter Lynch (on my Mount Rushmore of investors) has said, “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
I would say more money has been lost chasing a “hot new thing” like quantum computing stocks that distracts from a lucrative opportunity in your lap. AI is that opportunity, now and for at least the next year.
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P.S: For more insights into the AI megatrend and specific stock analysis, subscribe to my investing letter The Jolt⚡.
I publish fresh research every M/W/F.
— Stephen McBride, Chief Analyst at RiskHedge
