Why Did Red-Hot Quantum Computing Stocks Just Plunge Over 40%?

TradingKey - Unless you’ve been living under a rock in the last few months of 2024, most investors will have been aware that quantum computing stocks were on fire. Given the hype surrounding the breakthrough of the “Willow” quantum computing chip by Alphabet Inc (NASDAQ: GOOGL), quantum computing stocks took off.

Stocks like Rigetti Computing Inc (NASDAQ: RGTI) and D-Wave Quantum Inc (NYSE: QBTS) soared, with both those companies seeing their share price soar by 400% and 196%, respectively, just in December 2024 alone. In terms of their total 2024 return, many were 10-baggers or even close to 20-baggers (i.e. up 1,000% to 2,000% in the space of just 12 months). 

However, on Wednesday (9 January) that red-hot streak seemed to have come to an end as the “quantum bubble” many had predicted started to deflate, with many quantum computing stocks seeing massive double-digit declines.

Rigetti Computing shares finished the trading day down 45%, D-Wave Quantum fell 36% for the day, and Quantum Computing Inc (NASDAQ: QUBT) was down 43%. 

But what caused the massive sell-off in quantum computing stocks, on a day when the broader S&P 500 Index actually finished up 0.2%?

Nvidia CEO says quantum computing years away

It basically all came down to one man; Nvidia Corp (NASDAQ: NVDA) CEO Jensen Huang – who was answering questions at a Q&A session during Nvidia’s analyst day. The chip giant’s CEO said that “very useful” quantum computers are likely decades away.

That sparked a huge plunge in quantum computing stocks across the board, many of which had run up in anticipation of quick progress in the quantum computing space.

His exact words didn’t instill confidence for investors in quantum computing stocks as Huang was quoted as saying that “If you kind of said 15 years for very useful quantum computers, that would probably be on the early side”.

And he went on to say that most people would believe that really useful quantum computers are likely around 20 years away. 

Quantum stocks plunge after huge 2024 run up

Source: Bloomberg

Healthy correction?

Many analysts were looking at the massive plunge in stock prices as a healthy correction in the shares of companies that had run up so fast in 2024. Valuations had become sky high and there was nothing essentially “new” coming from Huang’s comments.

Numerous industry experts had acknowledged that the world is in the early days of a quantum computing revolution. Clearly, the smaller quantum computing stocks had gotten ahead of themselves – many are still loss-making companies so price-to-earnings (PE) multiples don’t even apply.

Perhaps Huang’s latest comments cemented what many had already quietly been thinking about the viability of quantum computing stocks in the near term. Despite that, many investors could drive shares higher if near-term catalysts, such as further quantum breakthroughs, come to fruition.

Investors should also be cognisant of the fact that this could be the start of the deflation of a quantum computing bubble that could see several more sessions of sell-offs in the segment.