Quantum Computing: A Bubble in the Making?

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Quantum Computer

For the last thirty years or so, investors have been chasing the next big thing with the enthusiasm of a terrier after a particularly interesting scent. Usually, it’s one thing at a time – the internet, mobile phones, artisanal toast – but lately, we’ve had a couple of contenders jostling for attention. Artificial intelligence, naturally, is hogging the limelight, but quietly, in the background, quantum computing has been making a bit of a stir. And when I say “stir,” I mean a rather alarming amount of money has been thrown at it, which, as anyone with even a passing acquaintance with financial history knows, is rarely a good sign.

Now, quantum computing, for the uninitiated, is… well, it’s complicated. It involves harnessing the bizarre laws of quantum mechanics – things like superposition and entanglement, which even physicists admit sound like something out of a science fiction novel – to perform calculations that are beyond the reach of even the most powerful conventional computers. The potential, they say, is enormous. Analysts at Boston Consulting Group envision a $450 to $850 billion market by 2040. The Quantum Insider, ever the optimist, goes even further, predicting a trillion-dollar valuation by 2035. These numbers, of course, are estimates, and about as reliable as a weather forecast for next Tuesday, but they do a fine job of getting people excited.

And excited they’ve been. Shares in companies like IonQ, Rigetti Computing, and D-Wave Quantum have experienced, shall we say, a spirited run. Rigetti, at one point, saw its share price climb over 6,200% in a year! It’s enough to make a seasoned investor reach for the smelling salts. Amazon’s Braket service, allowing customers to access these quantum computers, and JPMorgan Chase’s $1.5 trillion investment initiative have only added fuel to the fire. It all sounds wonderfully promising, doesn’t it? And that, my friends, is precisely the problem.

Because here’s the thing about bubbles – and history is littered with them, from tulip mania in the 17th century to the dot-com boom of the late 90s – they don’t form around sensible, well-understood investments. They form around things that are new, exciting, and, crucially, poorly understood. And right now, quantum computing falls squarely into that category. Investors, it seems, are willing to bet on the promise of the future, even if they haven’t quite figured out how that future will actually arrive.

Recently filed Form 13Fs – those quarterly reports that reveal what the big institutional investors are buying and selling – tell a rather interesting story. These aren’t the retail investors getting swept up in the hype; these are the professionals, the people who are supposed to know better. And they’ve been quietly reducing their holdings in IonQ, Rigetti, and D-Wave. Not a mass exodus, mind you, but a noticeable dip. IonQ saw institutional ownership fall from 57.35% to 54.71% in a single quarter. Rigetti dropped from 50.71% to 48.45%. D-Wave fared even worse, falling from 53.94% to 48.76%. The reason isn’t necessarily a lack of faith in the technology, but rather a healthy dose of skepticism about the valuations.

These companies are still in the very early stages of development, and they’re burning through cash at an alarming rate. To raise capital, they’re relying on dilutive share offerings, which means existing shareholders are seeing their ownership stake reduced. It’s a bit like trying to fill a leaky bucket with more water – you might temporarily raise the level, but eventually, it’s all going to drain away. And let’s not forget the historical precedent. Every groundbreaking technology, from the steam engine to the internet, has experienced a bubble-bursting event. Investors tend to overestimate the speed of adoption and the pace of innovation.

And then there’s the price-to-sales ratio. These companies are trading at truly astronomical levels. A P/S ratio above 30 is generally considered a warning sign, and these companies are well into the stratosphere. Even with sustained triple-digit sales growth, it’s going to take a long time for them to justify these valuations. It reminds me of the South Sea Bubble of 1720, where investors drove the price of South Sea Company shares to ridiculous heights, convinced that they were about to become unimaginably wealthy. Needless to say, it didn’t end well.

So, what does it all mean? Is quantum computing a revolutionary technology that will transform the world? Perhaps. But is it a viable investment right now? That’s a much more difficult question. The 13Fs suggest that the savviest investors are taking a cautious approach, and that’s probably a wise move. As the saying goes, it’s better to be skeptical and miss out on a potential opportunity than to be greedy and lose your shirt. And as any historian will tell you, bubbles always burst, eventually.

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2026-02-25 13:12