Investing.com -- Shares of companies involved in quantum computing experienced a significant sell-off on Thursday, with four notable companies seeing their stock prices tumble. Rigetti Computing (NASDAQ: RGTI) fell by 26%, Quantum (NASDAQ:QMCO) Computing Inc (NASDAQ: QUBT) dropped by 37%, D-Wave Quantum (NYSE: QBTS) declined by 25%, and Quantum Corporation (NASDAQ: QMCO) plummeted by 39%.
The driver behind the sharp decline appears to be a shift in sentiment among investors, who are reevaluating the soaring valuations in the quantum computing sector. Despite the day's losses, these companies have posted remarkable gains year-to-date (YoY), with Rigetti Computing up by 700%, Quantum Computing by 1500%, D-Wave Quantum by 650%, and Quantum Corporation by 450%. The sector has been a favorite among momentum traders, but skepticism about the technology's current capabilities and concerns over inflated valuations have now taken the forefront.
Adding fuel to the fire, activist short seller Citron Research recently targeted Quantum Corporation on social media. Citron has a history of setting sights on companies like Rigetti Computing, and their latest commentary has not gone unnoticed by the market. Citron criticized the industry, particularly highlighting Quantum Computing Inc's financials. The short seller's comments on R&D spending disparities among small-cap quantum companies and the comparison to tech giants have raised doubts about the sustainability of the current valuations.
Citron Research stated, "Small-cap quantum stocks are in a bubble, but $QUBT stands out as the most ridiculous. The numbers tell the story. R&D spending is THE critical indicator in this space: last quarter, $IONQ allocated $33M and $RGTI $12M, modest figures next to tech giants like Google (NASDAQ:GOOGL). Yet $QUBT spent a mere $2M on R&D—a striking mismatch for a company claiming to 'offer integrated high-performance quantum systems.' Let's not forget the issued equity at $2.50 just a month ago. The financials simply don’t align—follow the data."
Investors seem to be heeding Citron's warning, as evidenced by the sharp downturn in stock prices across the sector. The sell-off reflects growing concerns over the disparity between the companies' market valuations and their actual investments in research and development, which is a crucial aspect of success in the high-stakes field of quantum computing. As the market continues to digest these revelations, the volatility in quantum computing stocks is a stark reminder of the risks associated with investing in emerging technologies.
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