Analyst flags new quantum computing stocks to buy | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Last week, investors took note as a group of unexpected tech stocks started rising steadily. These companies weren’t part of the Magnificent 7, a group of tech leaders responsible for most of the sector’s growth. In fact, they often fly under most investors’ radar.

The companies were part of the quantum computing field. This fast-growing market centers around a type of computing that leverages the principles of quantum mechanics, solving complex problems by utilizing quantum bits (qubits) of information at significantly higher speeds than traditional computers.

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While quantum computing is sometimes overshadowed by artificial intelligence (AI), the industry has been making strides lately, particularly by one company. Its most recent news sent quantum computing stocks surging last week, though the momentum has since cooled.

However, one financial expert believes the sector is poised for growth. He recently flagged a few quantum computing stocks as likely winners.

A Wall Street veteran sees quantum computing as the tech sector’s next growth market.

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Two quantum computing stocks have encouraging potential

When quantum computing stocks are trending, it’s often due to updates from D-Wave Quantum (QBTS) . A leader in practical quantum computing, D-Wave has emerged as the industry’s leader, rising more than 470% over the past two quarters.

Wall Street veteran Stephen Guilfoyle, who follows the sector closely, recently highlighted the progress demonstrated both by D-Wave and its peer Quantum Computing (QUBT) , a company that produces photonic hardware solutions for quantum machines.

While Guilfoyle admits that he prematurely exited his position in D-Wave, he now sees it as a small-cap stock that is “ripe for the picking” for investors looking to gain exposure to the fast-growing quantum computing industry. While he describes QBTS as being “more ripe” than QUBT, he sees potential in both stocks.

Earlier this month, D-Wave reported extremely strong Q1 earnings, setting records for both Generally Accepted Accounting Principles (GAAP) gross profit and quarterly end cash position. Guilfoyle highlighted both companies’ earnings progress in a recent analysis, stating:

“Two weeks ago, Quantum Computing went to the tape with the firm’s first quarter financial results. The firm posted a GAAP EPS of $0.11, which was a surprise profit, on revenue of just $39,000. That top-line number, believe it or not, was good enough for year-over-year growth of 44%. D-Wave, on the other hand, in early May, posted a Q1 GAAP EPS of -$0.02 on revenue of $15 million. That number, while still minuscule in our world, was enough to drive year-over-year growth of 507%.”

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The analyst also flags a positive change for D-Wave, stating that its balance sheet had improved and should no longer be considered inferior to Quantum Computing’s. While he adds that D-Wave’s books include a few longer-term liabilities, he notes that it has adequate cash to address them should the need arise.

Guilfoyle predicts big things ahead for quantum computing stocks

In his analysis, Guilfoyle is careful to note that by traditional financial standards, both QBTS and QUBT should be considered “grossly overvalued.” He notes, though, that capital is still flowing into Palantir Technologies, an AI-focused software producer that is also considered overvalued and is currently up almost 500% for the year.

As TheStreet reported earlier this year, several quantum computing stocks surged late in 2024, leading to speculation that their high valuations could pose problems in the near future.

While these companies may be overvalued, Guilfoyle doesn’t seem worried about the future of the industry. He still believes that quantum computing is a sector ripe with potential, comparing it to another area of technology that has boomed recently.

“Generative AI is the latest and greatest thing now in the technology world and will likely be with us from anywhere from a long time to something close to the rest of conceivable time as it evolves,” he states. “That said, quantum computing will be far more powerful and speedy than any supercomputer invented so far. Quantum computing, in my amateur opinion, remains the next great thing.”

If he is correct, companies like D-Wave and Quantum Computing are likely well-positioned to help lead the charge as this new frontier of technology continues to mint a new generation of market winners.