Welcome to jobs Friday. The December nonfarm payrolls report arrived with arguably greater than usual heft as investors appear increasingly nervous about surging government bond yields amid signs of revived inflation.
Equity bulls were hoping for a payrolls number that was not too hot and not too cold. However, a notably stronger-than-expected report is pushing Treasury yields to fresh multi-month peaks and forcing equity index futures lower.
However, one bubblicious sector of the stock market may have struggled to rally regardless of whether the jobs numbers gave equity bulls what they wanted.
Small quantum computing stocks dived this week after Nvidia (NVDA) CEO Jensen Huang made clear to investors what they should have already known. Talking to analysts at the CES convention in Las Vegas on Tuesday, the executive said that “very simple quantum computers” could still be 20-years away.
The reaction among quantum stocks favored by retail investors in particular was swift and brutal. Shares of Rigetti Computing (RGTI), which in the previous three months, for example, had surged more than 2,000% tumbled around 45%, Quantum Computing (QUBT) slid 43%, IonQ (IONQ) plunged 39%, and D-Wave Quantum (QBTS) dived 36%.
However, that still leaves many of these stocks with huge gains over recent months. Again, looking at Rigetti, its stock was less than a buck in October, and by close on Thursday was $10.04.
And that means such stocks should continue to be sold short, according to Martin Shkreli, the investor who was sent to prison for securities fraud and whose defense of sharp drug price hikes by a company he controlled earned him the nickname “Pharma Bro.”
In a long message on X this week, Shkreli said quantum computing stocks “are so humorously overvalued, they conjure the dot-com bubble.” Several of them had downside of 90% or more, he added.
Shkreli’s X message contained an explanation of quantum theory and its use in computing. He applied his reasoning to the four companies noted above and their various approaches to utilizing the technology.
IonQ gets Shkreli’s respect for its “academic achievements” and he noted the company’s revenues appear to be growing, with $41.6 million in annual revenue for 2024, according to FactSet estimates. “The company has talked about putting out a 100-qubit computer called Tempo by the end of this year. Unfortunately, IBM is already far ahead of this scale,” he said.
Still, Shkreli has a fair value of $11.23 for IonQ. Though that’s way below the current $30 share price it still implies the company has prospects. In contrast, fair value for Rigetti he says is $1.00, while he considers D-Wave and Quantum Computing, which had revenue of just $101,000 in the third quarter, have fair values of 1 cent apiece.
In a message dated December 8, Shkreli said he was short IonQ and Regetti – though he didn’t say at what level he sold. Anyway, he’s maintaining the strategy.
In this week’s missive he said: “For those who want me to cut to the chase: I recommend shorting D-Wave Systems, Rigetti, IonQ and Quantum Computing Inc”.
And he added that he doesn’t think quantum computing will be material to Alphabet (GOOG) or IBM (IBM). “The misunderstanding seems to be the idea that quantum will ‘change everything’. No. It will help a few nerdy people, like me, study cryptography and odd, but useless mathematical problems, more easily. That is not a big industry,” he concluded.
