Investors probably aren’t thinking all too much about the former high-flying quantum computing stocks or the nascent technological trend as a whole now that most of the names are down an obscene amount from their prior all-time highs (some of the pure-plays are now off more than 60% from their all-time highs).
But, it’s times like these when few, if anyone, is still interested, when there tend to be better deals to take advantage of. Indeed, who wants to be caught chasing a stock while it’s falling endlessly? A 60-70% drop might turn into an 80-90% drop. And a 90% drop might turn into a 95% decline. It can feel like picking up a few dimes and quarters in front of a steamroller.
Though being a hero is hard, I do think that writing off quantum computing, as a whole, might be a bit of an overreaction, even if investors are tired of buying stories, growth promises, and hype, rather than entering all of the numbers into a discounted cash flow (DCF) model and making sure things make sense, plus or minus a margin of safety. In any case, don’t look for quantum tech news to move the needle any longer.
The quantum computing stocks are under pressure. Who can even think about buying that trend nowadays?
The momentum has been so incredibly violent, not just in the quantum pure-plays, but across the tech market. Speculation and high-risk thrills are seemingly off the table for good, at least until the next leg, which might not come until after AI winter comes to an end.
Who knows? The recent bout of underperformance in volatile AI stocks might span the next two years or more. It’s really hard to tell when investors are this willing to hit that sell button on tech stocks, or just about anything else.
While I personally wouldn’t buy the quantum pure-play stocks while they’re on the way down, I do think that keeping tabs on the tech still makes sense, even if you’re committed to staying glued to the sidelines. The “quantum advantage” might still be premature. And getting in too early to a trade may very well be the same as being wrong. Either way, I think there are great marked-down companies that might have quantum upside with a slightly lower risk profile.
As intriguing as the dip in quantum pure-play stocks is, I’d much rather bet on the diversified names that don’t have such high betas. We’re talking about quantum upside with enough diversification such that the downsides aren’t so severe, should the tech be further off than expected.
International Business Machines
International Business Machines (NYSE:IBM | IBM Price Prediction) is a legacy tech company that has skin in the quantum game. Though it’ll take a long time (think 2033) before the firm can achieve a 100,000-qubit system, I do view International Business Machines as having a great backup plan, just in case the roadmap experiences a few bumps along the way. Most notably, the firm stands to gain from AI as it transitions from software and the mainframe.
While significant monetization of quantum tech might still be well off, I think shares might be a worthy pick-up for the chance that its AI prowess can accelerate its quantum roadmap by a bit. Either way, the firm recently touted its quantum computer for simulating magnetic materials.
That’s impressive, but for investors, they’re probably not going to be as impressed until the tech is further along the commercialization track. Any way you look at it, International Business Machines is already using quantum tech to solve hard problems. As the firm keeps focusing on the tech, perhaps the 21.2 times trailing price-to-earnings (P/E) multiple doesn’t do the stock enough justice.
In the meantime, look for the firm to make a big splash as the AI boom moves to agentics. The latest $11 billion Confluent deal, which is now closed, is brilliant as the legacy software titan looks to become one of the many AI innovators looking to prove to investors that AI is a serious money-maker.
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