Quantum Computing Stocks In Focus: Pure Play Vs. Large Caps - Here's A Look At The Valuations
While still in its early stages, quantum computing is a major focus for a few pure-play companies, along with technology giants alike. Here is a breakdown of quantum computing-focused companies that investors could consider as the technology evolves.
What Happened: The key difference between the pure-play quantum computing companies and large technology giants lies in their core business focus and their stage of involvement in the quantum computing industry.
The pure-play companies are primarily, if not exclusively, focused on the development and commercialization of quantum computing technologies. The success of such companies is almost entirely tied to the progress and adoption of quantum computing.
The price-to-sales (P/S) ratio of these companies is used to analyze their valuation, as these companies, which are in early stages of development, have negative earnings, making the popular valuation metric, price-to-earnings (P/E) ratio, unusable.
Among a few pure-play quantum computing companies, D-Wave Quantum Inc. has the lowest P/S ratio of 199.114, whereas Quantum Computing Inc. had a staggering P/S ratio of 3,500.00, according to Benzinga Pro.
On the other hand, the established, diversified technology giants with vast resources and multiple revenue streams are also involved in quantum computing, but it is typically not a part of their broader R&D strategy.
These firms leverage their existing cloud infrastructure and expertise in AI and high-performance computing for quantum computing.
While the P/S ratios of these firms are much lower than their pure-play counterparts, Amazon.com Inc. has the lowest ratio of all at 3.358.
Why It Matters: Another way for investors to get exposure to the quantum computing stocks is via Defiance Quantum ETF (NASDAQ:QTUM).
It is an exchange-traded fund that tracks the BlueStar Quantum Computing and Machine Learning Index, which helps investors capture the growth potential of the quantum computing sector.
The ETF has gained 14.45% over the last month, 25.97% over the last six months, and 4.47% on a year-to-date basis, as per Benzinga Pro.
The ETF invests in over 70 global stocks across the value chain, including hardware, software, and application-focused companies. Its top holdings include Rigetti and D-Wave, followed by IonQ.
Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, fell on Friday. The SPY was down 0.68% to $579.11, while the QQQ declined 0.93% to $509.24, according to Benzinga Pro data.
On Tuesday, the futures of Dow Jones, S&P 500, and Nasdaq 100 indices were trading higher.
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