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An Introduction

The better the computing power, and the more data, the better a semiconductor will perform and, as such, the race is on for companies to radically upgrade the computing power of their models and that’s where quantum computing (QC) comes in. The QC industry is forecast to have a compound annual growth rate of 36.9% between now and 2030 and, while there will only be about 5,000 operational quantum computers by then according to McKinsey’s estimation, when they do, they will change the world as we currently know it.

Pure-Play Quantum Computing R&D Stocks Portfolio: DOWN 7.9% this week to date (August 19th)

All 4 of the pure-play quantum computing R&D stocks in the Portfolio are falling this week fueled by a number of catalysts: Below is how each constituent has performed to date this week, in descending order, and MTD and the primary reason(s) behind the declines in each instance

1. Quantum Computing Inc. (QUBT): DOWN 6.6% so far this week; UP 0.1% MTD
   • Focus: Develops photonic qubits that offer a number of key advantages over trapped ions or superconducting qubits.
   • Primary Reason(s) For Decrease: 
     • Poor Q2 Results: Net loss was 333% greater than analysts expected and, while much of the loss was attributed to a $28 million non-cash warrant expense, investors still reacted negatively with the widening loss  raising a red flags about sustainability; revenue fell 39% short of analysts' consensus estimate; and operating expenses nearly doubled as the company ramped up commercialization efforts.
     • Valuation Concerns: The poor Q2 results heightened investor concerns about the company's financial trajectory.
2. IonQ (IONQ): DOWN 8.5% so far this week; DOWN 7.7% MTD 
   • Focus: Planning to build a network of quantum computers accessible via the cloud using trapped-ion technology in its processing units.
   • Primary Reason For Decrease: 
     • Steep Loss in EPS: Reported a  457% decrease in its Q2 EPS which raised concerns about the company’s path to profitability.
3. Rigetti Computing (RGTI): DOWN 8.9% so far this week; UP 4.6% MTD
   • Focus: Specializes in superconducting qubit technology and has developed a suite of software tools and algorithms for programming and simulating quantum computations.
   • Primary Reason For Decrease: 
     • Major Loss in Q2 Net Income: The company experienced a staggering 219% drop in net income, albeit much of the loss being tied to non-cash accounting charges, but it still spooked investors.
4. D-Wave Computing (QBTS): DOWN 9.9% so far this week; DOWN 10.9% MTD 
   • Focus: Focuses on quantum annealing technology.
   • Primary Reasons For Decrease: 
     • ​​​​​​​Poor Q2 financials: EPS were 60% less than analyst expectations and the company’s EBIT margin was -1254.8%, and pre-tax margin -1034.5%, highlighting deep profitability challenges.
     • Insider Selling: Director Steven M. West sold 144,000 shares just days before the earnings release with CFO John M. Markovich selling 100,000 shares earlier in August and these moves raised concerns about internal confidence and future outlook.
     • Valuation Concerns: Analysts flagged D-Wave’s high price-to-sales and price-to-book ratios as potentially overvalued given the earnings miss and insider activity.

Summary

Our Pure-Play Quantum Computing R&D Stocks Portfolio is DOWN 7.9% so far this week, is DOWN 4.9% MTD and is now DOWN 4.9% MTD and is now only UP 0.2% YTD.

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