True promise… or a lot of hype?
While we approach every investment opportunity with a healthy skepticism, we have absolutely nothing against speculative growth investments in and of themselves.
For example, we recently highlighted BitMine Immersion Technologies (BMNR) as a speculative investment with an interesting risk-reward profile (Is BitMine the Next Crypto Superstar?).
Our thinking around these types of investments is just that investors should understand exactly what they are getting into as far as the elevated downside risk potential and high volatility. They should also be judicious about how much capital they are actually willing to risk on an investment of this nature.
If one is making any kind of highly speculative investment, one should be mentally and financially prepared for total loss.
That said, not all speculative growth investments are created equal.
While they all carry a relatively high degree of uncertainty, often based on uncertainty as to how technological trends will evolve, some ideas might have stronger foundations than others.
Quantum computing is definitely exciting. It taps into one of the most mysterious areas of physics, which gives this emerging slice of the investment world an almost magical quality.
Like nuclear energy, there is something miraculous about harnessing one of nature’s most elusive forces. The possibilities seem limitless.
But investors need to distinguish between technological promise and investable reality.
The quantum stocks that investors have been piling into do have some good things going for them—like potentially valuable intellectual property and relationships with larger firms. However, as businesses they tend to be quite underdeveloped relative to their valuations.
For perspective, even the most established of these companies, IONQ, which has a market cap around $20 billion, remains in the early stages of commercialization. Analysts currently expect IONQ to generate less than $100 million in revenue this year, while incurring operating losses around $300 million.
IONQ is trading around 200 times 2025 sales (and losing money). In contrast, a highly profitable AI stock like NVDA is trading just over 20 times sales (with approximately 65% operating margins).
That doesn’t make the opportunity illegitimate, but it does highlight just how immature the business is, despite the high valuation.
From an investment perspective, the comparison between quantum computing and AI is illuminating….
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