Investors are not always rational. They bet on futures yet to arrive. Sometimes they’re wrong and sometimes they’re simply early. Time and again valuations seem to take a backseat to narrative.
Consider the dot-com era, when fledgling internet companies with little to no revenue achieved eye-watering valuations. Much of that optimism landed badly, yet over the long arc of time, the underlying thesis that the internet would reshape the world proved remarkably prescient. Here, the timing was off but not the vision.
In the recent decades, technologies like electric vehicles, renewable energy, artificial intelligence, and biotechnology have fueled investor imagination. Some of them have delivered on promises, even as critics warned of speculative excesses. The true challenge lies in distinguishing between hype and genuine inflection points.
The latest speculative bet is quantum computing, with stocks like D-Wave (QBTS), IonQ (IONQ), and Rigetti (RGTI) soaring ahead of actual commercial progress.
D-Wave Quantum (QBTS) has been one of the market’s standout performers with shares up around 2,000% in the past year. Despite this surge, the company remains in the development stage, with limited revenue, and significant operating losses, though it maintains a solid cash position.
Right now, D-Wave Quantum exemplifies the tension between breakthrough technology and speculative valuation. Where is the stock headed after its spectacular rally? First, some context on D-Wave.
D-Wave Quantum At A Glance
D-Wave develops and delivers quantum computing systems, software and services. The company’s website says D-Wave is the world’s first commercial supplier of quantum computers, and the only company building both annealing and gate-model quantum computers.
Quantum annealing is a specialized approach designed mainly for optimization problems, like finding the best solution among many possibilities. D-Wave’s quantum annealing systems — Advantage and the newer Advantage2 — are available on-premises or via the cloud, and being explored in logistics, scheduling, AI/ML model training, and materials science, including proof‑of‑concepts and early enterprise use cases.
However, tech critics have questioned the long-term potential of the annealing approach, arguing that it is less flexible for general-purpose computing compared to gate-model systems. Some have gone so far as to call it a technological dead end.
But D-Wave defends its annealing quantum computing approach, saying it’s “misleading” and “ill-informed” to characterize the technology as “niche.” D-Wave maintains that both annealing and gate approaches solve important problems. Annealing is well-suited for optimization challenges, which gate-model systems struggle with, while gate-model quantum computers (once commercialized) are expected to excel in quantum chemistry and 3D fluid dynamics, which cannot be efficiently solved by annealing. D-Wave emphasizes that organizations will likely need both annealing and gate models to meet the full range of enterprise demands, and that’s why the company is building both.
While many competitors chase the gate-based universal quantum approach, D-Wave has an exclusive technology moat of being the only large-scale quantum annealer in the market with more than 250 U.S. patents, and engineering know-how. To top it, the company has an immediate customer base and commercial deployments to its credit.
What Drove QBTS Stock Price Higher?
Investor enthusiasm for QBTS has been fueled by a combination of broad market catalysts, technological breakthroughs and meaningful commercial milestones.
While broad gains in speculative stocks coincided with events like the election of President Donald Trump, the quantum computing sector has benefited from more substantive developments. Last December, Alphabet announced a major milestone with its Willow quantum chip, which completed a standard benchmark computation in under five minutes, a task that would have taken one of today’s fastest supercomputers an estimated 10 septillion years (10²⁵).
More recently, prominent industry leaders, including Nvidia’s Jensen Huang and Microsoft’s Satya Nadella, have underscored quantum computing’s disruptive potential. Huang, in particular, revised his outlook in June shifting from a cautious 20-year timeline for “realizing useful quantum computers” to suggesting that the technology “is reaching an inflection point.”
While broader optimism has certainly contributed to the stock’s rise, the 2000% gain in QBTS over the past year is not based on hype alone.
Launch of Advantage2 Quantum Computer
In its second quarter results, D-Wave reported technical progress and steady commercial traction. In May, D-Wave launched the Advantage2 quantum computer, described as its most advanced system to date.This system offers double the coherence time of its predecessor – the Advantage system – facilitating faster time-to-solution, a 40% increase in energy scale that yields higher-quality solutions; and enhanced qubit connectivity, increasing from 15-way to 20-way, enabling the resolution of larger and more complex problems.
D-Wave said the platform demonstrated quantum supremacy in a real-world materials simulation problem — a first for the industry. As a key breakthrough in its burgeoning on-premises business, D-Wave has already sold an Advantage2 system to the Jülich Supercomputing Center in Germany. Under a MOU, D-Wave is also exploring the sale of an Advantage2 system to the Yonsei University International Campus in South Korea.
Prioritizing integration of quantum into AI workflows
D-Wave introduced an open source quantum AI toolkit integrated with PyTorch – a production-grade framework widely used to build and train deep learning models. This marks a significant step toward unlocking the potential of quantum-enhanced AI workflows. According to D-Wave, these tools are already assisting its customers, including Japan Tobacco and Triumph, in developing hybrid quantum-classical machine learning applications. Going forward, integrating quantum into AI workflows will remain a priority development area for D-Wave.
Continued momentum in customer adoption
D-Wave pointed to new and expanded engagements with companies including E.ON, GE Vernova, U.K. ‘s National Quantum Computing Center, Nikon, NTT Data, NTT Docomo, Sharp Corp. and the University of Oxford. D-Wave is also building the proof of concept for a first of 12 use cases for a Fortune 500 aerospace and defense firm that is exploring quantum optimization.
Yet another highlight is the building of a quantum hybrid proof-of-technology for North Wales Police to optimize the deployment of patrol vehicles. The Leap Quantum LaunchPad program – a 3-month trial providing access to D-Wave’s quantum computing systems – has drawn more than 1,300 applications since its inception in January. D-Wave sees this program as a vehicle to seek and fast-track customers into proof-of-concept development and ultimately, application deployments.
D-Wave Quantum’s Recent Financial Performance
Revenue for the recently reported second quarter rose 42% year-on-year (YoY) to $3.1 million, while bookings nearly doubled to $1.3 million. For the most recent four quarters, D-Wave had in excess of 100 revenue-generating customers. Non-GAAP gross margin eased 1.3 percentage points to 71.8%. Adjusted EBITDA loss widened by $6.1 million, or 44% YoY, to $20 million, due mainly to higher operating expenses, despite higher gross profit.
The company ended the quarter with $819.3 million in cash following equity raises and warrant exercises. This represented a more than 1900% increase from its year-ago cash balance of $40.9 million,and a 169% increase from first quarter’s $304.3 million.
D-Wave plans to use the strength of its balance sheet to accelerate research, expand customer engagement and pursue acquisitions, reiterating its aim to be the first publicly traded independent quantum company to reach sustained profitability.
D-Wave Quantum’s Valuation After The Rally
QBTS is trading at a lofty valuation relative to sector norms. As D-Wave is still unprofitable, we are gauging valuation through price-to-sales and price-to-book metrics. Currently, QBTS trades at a forward price-to-sales ratio of 314x, far above the sector median of 3x, and a forward price-to-book ratio of 11.8x compared with the median of 4.6x.
This dynamic isn’t unique to D-Wave. Its peers carry similarly elevated multiples. IonQ (IONQ) trades at a forward price-to-sales of 213x and a price-to-book of 10.3x, while Rigetti Computing (RGTI) stands even higher at 875x forward sales and a forward price-to-book ratio of 13.7x. In each case, the narrative around future quantum potential has superseded valuations.
D-Wave Quantum’s Risks and Challenges to Know
Revenue base still tiny vs. steep valuation
D-Wave’s $3.1 million in quarterly sales is very modest relative to QBTS’ steep valuation. D-Wave attributes it to dealing with substantially larger organizations with multistep and rigid procurement processes, and documentation requirements, resulting in deals taking longer to close than originally anticipated.
Investors should also note that revenue tends to be lumpy in this kind of business. For reference, first-quarter revenues were $15 million, driven primarily by the sale of a quantum computing system.. Management sees the Advantage2 footprint reaching 6–7 systems through cloud upgrades and on-premise deployments, by the end of next year.
Widening losses
Rising operating losses due to heavy spending are a cause for concern and could spook investors despite the solid cash balance.
Government’s preference for gate model quantum computing
The U.S. government’s DARPA QBI program is focused exclusively on gate-based quantum computing, overlooking D-Wave’s annealing approach. The D-Wave CEO Alan Baratz stated that it’s a “huge mistake” for DARPA and the U.S. government to exclude annealing from the QBI program.
Baratz cited areas like missile defense, troop resupply, port logistics and wildfire fighting where annealing could potentially be the best quantum approach. He also noted that many of the government’s complex computational problems related to optimization, which annealing is uniquely suited to solve, unlike the gate model. It should be noted that although D-Wave is building gate models as well, it may be years before a scaled, error-corrected, commercially viable gate-based system actually becomes available.
During D-Wave’s second-quarter earnings call, Baratz further suggested that the U.S. government establish a second quantum program for non-gate model approaches. If the government heeds his suggestion, it would be a major validation for the annealing approach in quantum computing.
What Is D-Wave Quantum’s Long-Term Outlook?
D-Wave Quantum (QBTS) is a highly speculative play in the emerging quantum computing sector. In the near term, the stock is likely to be driven more by quantum computing hype cycles, strategic partnerships and technical milestones than by financial performance. The company’s cash reserves provide a modest cushion, but ongoing operating losses could weigh on investor sentiment. The long-term outlook depends heavily on whether D-Wave’s proof-of-concept projects translate into application deployments. If customer adoption scales meaningfully, or if initiatives like a DARPA-backed annealing program materialize, QBTS could see a significant re-rating. Notably, some analysts maintain a “Strong Buy” rating on QBTS with a price target of $22.20, implying a greater than 20% upside from its current stock price levels.
Is Now A Good Time To Buy D-Wave Quantum?
QBTS is currently trading about 14% above its 52-week high reached in late July. Whether that’s a buying opportunity depends on your risk tolerance. One approach may be to keep roughly 70% of your portfolio in core holdings like the VOO ETF and fundamentally strong stocks, hold about 20% in cash for opportunistic buys, allocate 7% to growth names, and reserve only 3% for speculative plays such as QBTS. This is a conservative approach that allows investors to participate in potential upside without overexposure to downside risk. You can adjust the allocation based on your risk appetite.
Bottom Line
D-Wave’s exclusive foothold in quantum annealing, its Advantage2 milestone and a growing customer pipeline are promising, but the valuation leaves little margin for error. Revenues remain small, losses are widening, and government support tilts toward gate-model approaches. For now, QBTS belongs in the speculative corner of a portfolio – a satellite holding rather than a core position. If adoption scales or if annealing gains policy backing, the payoff could be significant, but investors must be prepared for volatility along the way.