Quantum Computing Dreamers Face Stock Market Reality Check

The harsh realities of the quantum ecosystem are dawning on markets as two prominent quantum vendors acknowledge they are at risk of being delisted following shares dropping below the $1 mark.

D-Wave posted an update to its website on Friday revealing that it had been notified by the New York Stock Exchange (NYSE) on October 2 that it was not in compliance with the Listed Company rules because the average closing price of its common stock was less than $1 over a consecutive 30-day trading period.

Meanwhile, Rigetti Computing's stock has been trading at less than $1 since the end of July. The Berkeley, California-based outfit disclosed in a Form 8-K [PDF] filed with the US Securities and Exchange Commission (SEC) that it had been informed by the Nasdaq stock exchange that it was in a similar position.

Neither warning means that the companies face an immediate threat of being delisted, but this isn't the first time either company has found itself in the danger zone.

The developments shine a light on the state of the quantum market, which, having promised so much and delivered so little, faces a tailing off of investment. This is in part because investors believe there are much greater prospects of returns from the current generative AI bubble, but also because the benefits of true fault-tolerant quantum systems still seem as far off as ever.

As The Register reported earlier this year, companies involved in quantum computing faced a drop in 50 percent of venture capital funding last year as investors switched to generative AI or shied away from risky bets on Silicon Valley startups.

While this doesn't mean that investors have given up on quantum, it reflects the realization that progress towards any quantum nirvana is going to be slower than expected and likely to proceed in small steps.

D-Wave, a quantum pioneer, has built its business around a type of processing called quantum annealing, which is useful for some optimization problems. The company has also started to develop its own version of quantum gate technology pursued by other companies in the field.

In its update, D-Wave said that it had notified the NYSE that it intends to cure its stock price and return to compliance with the required listing standard. It can do so at any time within a six-month period if its share price is at least $1 on the last trading day of any of those months and and the average price has been above $1 over the preceding 30-day trading period.

The company said it intends to consider all available alternatives, including but not limited to a reverse stock split.

In its most recent earnings report for Q2, D-Wave listed revenue of $2.2 million, which it cited as an increase of $0.5 million, or 28 percent, over the same period last year. It also claimed that bookings for the quarter stood at $2.7 million, an increase of 6 percent year-on-year.

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Rigetti Computing, once regarded as a potential leader in quantum, boasted of being one of the few companies working on a full-stack solution for hybrid classical/quantum computing. It now faces a compliance period of 180 calendar days, or until March 17, 2025, wherein its stock must be at least $1.00 for a minimum of ten consecutive business days to regain compliance.

Like D-Wave, the company says it will actively monitor the closing bid price of its common stock and will consider available options to regain compliance, including potentially seeking a reverse stock split.

Rigetti's Q2 earnings showed that its revenue for the quarter was $3.1 million, but the company reported an operating loss of $16.1 million.

"Quantum computing for the most part is still a nascent technology, specifically the gate-based systems," said Heather West, Research Manager for Quantum Computing Infrastructure Systems at IDC.

"While there has been some recent R&D momentum with regards to logical qubit development and error correction, vendors are still challenged in their ability to scale these quantum systems to the larger number of high-quality qubits needed to solve real-world problems of value. The hardware issues need to be resolved before quantum algorithms for real-world use cases can accurately be mapped to circuits, and circuits to qubits."

West reiterated that quantum has lost some of its shine as far as investors are concerned.

"Organizations looking to gain a near-term ROI could see AI investments as the better option at this point just based on technology maturity. Organizations may also be more likely to invest with quantum vendors that appear to be further along in their technological development," she said, although it is unclear when and who will deliver a scalable system that can be used for solving real-world problems.

She also highlighted a further disadvantage that quantum startups face.

"The long-term development of the technology takes time and money. While established tech companies like IBM have a variety of revenue streams to depend on, startups like Rigetti depend on their quantum revenue only, which is why some startups entered into SPACs. While entering into SPACs can have some benefits, they also have their own challenges such as meeting the demands of investors." ®