D-Wave Quantum trims back its losses in its latest quarter and points to strength in customer orders. ...

Core Viewpoint - The article highlights that while quantum computing has potential, it is not yet a near-term growth driver for companies like IBM, which offers a more established investment opportunity with significant exposure to quantum innovation and a profitable AI-driven business [1][2][4]. Quantum Computing Strategy - IBM has been investing in quantum computing hardware and software for decades, aiming to achieve "quantum advantage" by the end of 2026 and develop a large-scale, fault-tolerant computer by 2029 [5][8]. - The first 120-qubit Nighthawk system is set for client use in late 2025, indicating progress in quantum capabilities [7]. Financial Performance - In Q4, IBM's software revenue increased by 14% year-over-year to $9 billion, making up nearly 46% of total revenue, showcasing a shift towards a software-led model [10]. - IBM generated $14.7 billion in free cash flow in fiscal 2025, with guidance for nearly $15.7 billion in 2026, providing flexibility for dividends and acquisitions [11]. AI Strategy - AI is a significant growth engine for IBM, with a cumulative generative AI business valued at over $12.5 billion, including over $2 billion in software and more than $10.5 billion in consulting [12]. - The company's AI stack, including the watsonx suite and Red Hat OpenShift platform, is designed to enhance productivity and flexibility across hybrid cloud environments [13]. Competitive Positioning - IBM's acquisition strategy, including a planned $11 billion acquisition of Confluent, aims to enhance its AI capabilities by providing access to live enterprise data [14]. - Management anticipates that nearly 50% of enterprise AI usage will occur in private clouds or on-premise data centers in the next three to five years, positioning IBM favorably in this market [15]. Valuation - IBM is trading at 19.2 times forward earnings with a 2.6% dividend yield, presenting a balanced exposure to quantum computing research, AI monetization, recurring software revenue, and strong free cash flows [17].

Group 1 - Quantum computing is anticipated to be a transformative technology, but widespread adoption may still be a decade away [1] - Rigetti Computing (NASDAQ: RGTI) is a leading stock in the quantum computing sector, experiencing significant volatility with a peak increase of 270% in 2025 before falling to around $15 per share [3][5] - The company generated $1.9 million in revenue in Q3, down from $2.4 million year-over-year, and reported a net loss of $201 million, indicating the early-stage nature of the quantum computing industry [6] Group 2 - Rigetti's stock surge was driven by improvements in error rates, major partnerships, and speculative interest in quantum computing [5] - The CEO indicated that achieving "quantum advantage" will take about four years, with broader commercial viability expected post-2030 [7] - The ongoing sell-off in Rigetti's stock is attributed to profit-taking and the stock being overvalued due to its previous price surge without corresponding sales or earnings [8]

Core Viewpoint - The quantum computing sector is facing scrutiny from activist investors, with all four major publicly-traded companies being targeted for short-selling due to their high market valuations relative to modest revenues [1] Company Overview - D-Wave Quantum, one of the key players in the quantum computing industry, has seen its stock price triple since being targeted by short-seller Kerrisdale Capital, which questioned the efficacy of its technology [2][3] - D-Wave reported a revenue increase to $22 million for the most recent nine-month period, up from $6.5 million the previous year, despite a market cap of $7.4 billion [6] - The company has over 100 paying customers, including notable names like Ford and BASF, and recently secured a $10 million licensing deal with a Fortune 100 company [15][16] Market Dynamics - The total addressable market for quantum computing is estimated to be between $200 billion and $1 trillion, leading to speculative investments in the sector [8] - D-Wave's business model is distinct, with less than 10% of its revenue coming from government contracts, contrasting with many competitors that rely heavily on government funding [17] Technological Challenges - Quantum computing technology is complex, with qubits needing to be error-corrected, which presents significant engineering challenges [9][10] - D-Wave's recent acquisition of Quantum Circuits for $550 million aims to enhance its technology by improving the efficiency of qubit error correction [12][13] - The company acknowledges the difficulties in advancing quantum technology and the potential for delays in future product developments [11] Strategic Moves - D-Wave is focusing on commercializing its quantum annealing method, which optimizes solutions by identifying the lowest energy state [15] - The acquisition of Quantum Circuits is expected to revolutionize D-Wave's capabilities by reducing the number of physical qubits needed for error correction [14]

Core Insights - The article introduces "The Undercovered Dozen," which highlights twelve actionable investment ideas on tickers that receive less coverage, ranging from large caps to small caps [1] Group 1: Inclusion Criteria - Tickers must have a market cap greater than $100 million [1] - Tickers must have received more than 800 symbol page views in the last 90 days on Seeking Alpha [1] - Tickers must have fewer than two articles published in the past 30 days [1] Group 2: Purpose and Follow-up - The initiative aims to provide investors with a weekly review of undercovered investment ideas from analysts [1]

Core Insights - Amazon has evolved from an online bookstore to a multifaceted company, excelling in cloud services, quantum computing, and artificial intelligence [2] - Despite its strengths, Amazon's latest earnings report showed mixed results, leading to a decline in its share price [2] Group 1: Amazon's Business Segments - Amazon Web Services (AWS) is the most widely adopted cloud system globally, providing a range of services including compute, storage, developer tools, and security [3] - AWS accounts for 18% of Amazon's net sales over the past 12 months and is the fastest-growing revenue segment, with sales increasing by 24% in the fourth quarter of 2025 [4] - The North American segment sales rose by 10%, while international sales increased by 17% [4] Group 2: Quantum Computing Services - AWS offers quantum computing services through Amazon Braket, allowing users to access quantum computing without owning the hardware, which can cost over $10 million [5] - Braket connects users to quantum computers from competitors like D-Wave Quantum, IonQ, and Rigetti, positioning Amazon as a key player in the quantum computing industry [6]

Core Insights - IBM is a long-established company that has successfully adapted to new technologies, particularly in quantum computing, positioning itself as a leader in the field [1][2] Company Overview - IBM was founded in 1911 and has maintained its reputation for innovation despite its age [1] - The company is recognized for its significant resources and reputation in the quantum computing sector, outpacing competitors like Rigetti Computing and D-Wave Quantum [2] Quantum Computing Technology - Quantum computers utilize quantum bits (qubits) to perform complex calculations, differing fundamentally from classical computers that use binary bits [5][6] - Qubits can exist in multiple states simultaneously, allowing quantum computers to solve problems much faster than classical computers, although they are not suited for everyday tasks [7] IBM's Quantum Capabilities - IBM currently offers 2,299 qubits for customer use and possesses the largest quantum computer with 1,121 qubits [8] - The Nighthawk quantum processor, IBM's latest innovation, features a scalable 120-qubit design that enhances complexity by 30% compared to its predecessor, the Heron chip [9] - The Nighthawk chip also boasts a 20% increase in inter-qubit connections, enabling it to handle larger and more complex workloads [10]

Core Insights - D-Wave Quantum has reported significant advancements in its business, including a $10 million enterprise agreement with a Fortune 100 company and a $20 million sale of a quantum computer to Florida Atlantic University, totaling $30 million in new bookings for January 2026 [3][4]. Business Developments - The company has completed the acquisition of Quantum Circuits, enhancing its capabilities with revolutionary gate model technology, making it the only dual-platform quantum computing company that supports both annealing and gate approaches [4][16]. - D-Wave is establishing a new R&D center in Boca Raton, Florida, and has moved its corporate headquarters from Palo Alto, California, indicating a strategic shift to enhance its business operations [18]. Market Position - D-Wave is positioned as a leader in the quantum computing space, being the only company that provides both annealing and gate model quantum computers, which allows it to cater to a wide range of applications [14][16]. - The company is currently working with several large corporations, including a major US airline and a leading chemical company, indicating a strong demand for its quantum computing solutions [7]. Financial Performance - The stock of D-Wave has seen a significant increase, with a reported rise of over 300% in the past year, reflecting positive market sentiment and analyst support [11]. - Analysts have issued buy ratings for the stock, with targets set at $48 and $35, further indicating confidence in the company's growth potential [9]. Applications and Use Cases - The enterprise agreement with the Fortune 100 company is a two-year contract valued at $10 million, aimed at addressing complex business optimization problems across various applications, including workforce scheduling and manufacturing optimization [5][10]. - D-Wave's collaboration with Anderol and Davidson Technologies focuses on missile defense applications, showcasing the potential of quantum computing in national security [12][13].

Group 1 - D-Wave Quantum has secured its first large enterprise deal, indicating progress in the commercialization of quantum technology [1] - The sale of the system marks a significant milestone for the company and the broader quantum sector [1]

Core Viewpoint - Quantum Computing (QCi) is experiencing significant stock price appreciation but presents serious investment risks due to its high valuation and share dilution issues [2][11]. Company Overview - QCi specializes in photonics technology for quantum computing, which operates at room temperature and requires low power, distinguishing it from other quantum systems [5]. - The company has a market capitalization of approximately $2.7 billion and has generated only $546,000 in revenue over the trailing 12 months, resulting in a price-to-sales (P/S) ratio exceeding 3,000 [3][8]. Financial Performance - QCi's stock has increased by 591% over the last three years, but the company has not yet achieved substantial revenue growth [2]. - The company has a robust balance sheet with over $1.5 billion in cash and investments, crucial for funding its high research and development costs [6]. Share Dilution - QCi has quadrupled its outstanding shares from about 60 million to 224 million over the past three years, raising concerns about share dilution for existing investors [7][9]. - The repeated issuance of new shares to raise capital has resulted in a significant reduction in the ownership stake for early investors [7]. Competitive Landscape - QCi faces fierce competition from other pure-play quantum computing companies such as D-Wave, IonQ, and Rigetti, as well as major tech firms like Alphabet, IBM, and Nvidia that are also investing in quantum technologies [10][11]. - The uncertainty regarding which quantum computing method will prevail adds to the investment risk associated with QCi [5][11].