Quantum computing is often described as the next frontier of technology, capable of solving problems far beyond the reach of classical computers.

By harnessing the principles of quantum mechanics like superposition and entanglement, quantum computers can process complex calculations at speeds unimaginable with today’s technology.

The potential applications are endless, ranging from medical research and material science to cryptography and artificial intelligence.

However, the field is still in its early stages. While the technology shows immense promise, the timeline for practical, profitable quantum solutions remains uncertain.

Developing reliable quantum hardware and algorithms faces major scientific and engineering challenges.

Quantum computing has potential, its current capabilities are limited to niche calculations, and significant advancements are still needed before it becomes widely useful.

Despite these hurdles, companies continue to invest heavily in quantum research, betting on long-term breakthroughs.

D-Wave Quantum (QBTS) is one of the notable players in this emerging field.

The company is focused on developing and commercializing quantum computing systems, software, and services designed to address complex computational problems.

D-Wave has gained attention for its quantum annealing approach, a method suited for optimization problems such as supply chain logistics, financial modeling, and machine learning.

Unlike some competitors that focus on gate-based quantum computing, the company has carved out a niche in solving real-world problems using its annealing technology, which is currently more accessible and practical for specific use cases.

Furthermore, D-Wave recently reported that it has achieved “quantum computational supremacy” by being the first company to achieve real-world results with its Advantage annealing quantum computer and achieved a 128% increase in bookings year-over-year in 2024.

Despite its innovative positioning and recent performance, the company faces challenges that are common among quantum computing companies.

Like others in the sector, D-Wave is not yet profitable, burning cash as it continues to invest in research and development and expand its customer base.

With its struggles, the market still expects the company’s profitability to rise rapidly.

Our EEA model clearly shows this.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market expects the company’s Uniform return on assets ”ROA” to increase to 37% from (40%) last year.

Investors are betting on D-Wave’s ability to scale its technology and attract long-term demand, but the reality is that much of this success hinges on the broader adoption of quantum computing and the timeline for its maturity.

Furthermore, Microsoft’s (MSFT) latest breakthrough in quantum technology introduces a new element into the mix.

The company’s recent introduction of the Majorana 1 quantum chip, powered by its Topological Core architecture, represents a significant leap forward in quantum computing.

This chip leverages topoconductors, a new class of materials that enable the creation of more stable and scalable qubits, the fundamental units of quantum computing.

Unlike traditional qubits, which are highly susceptible to errors and environmental interference, Microsoft’s topological qubits are designed to be more robust and digitally controllable, offering a clear path to scaling up to a million qubits on a single chip.

For D-Wave, Microsoft’s breakthrough poses a significant challenge.

While the company has been a pioneer in quantum annealing systems, which excel at solving optimization problems, Microsoft’s topological qubits aim for a broader, more universal application of quantum computing.

This could make D-Wave’s technology appear niche in comparison, especially as Microsoft’s advancements promise greater stability and scalability.

Additionally, Microsoft’s potential integration of quantum computing with its Azure cloud platform gives it a competitive edge in attracting commercial customers, potentially overshadowing D-Wave’s offerings.

As Microsoft accelerates toward practical, industrial-scale quantum solutions, D-Wave may face increased pressure to innovate and diversify its technology to remain relevant.

Investors need to weigh the risks of putting their money into companies that are unprofitable today and working on technologies that may take decades to become mainstream.

This doesn’t mean these companies lack potential, it means the journey to realizing that potential is likely to be a long one, marked by volatility and uncertainty.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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