Key Points
Quantum Computing has soared over the last year, but its revenue is still negligible.
Sweetgreen has a long runway of growth despite its recent struggles.
Investors seem to be catching on to Innodata's potential.
Quantum computing stocks have soared over the last year as investors' hopes have mounted that it will be the next big transformative technology.
The momentum began last December, when Alphabet unveiled its Willow quantum chip, which it said could do a calculation in less than five minutes that would have taken a traditional supercomputer 10 septillion years. This year, quantum computing stocks have moved higher, as the technology has been endorsed by the likes of Nvidia CEO Jensen Huang, and some pure-play quantum computing stocks seem to be delivering real progress, and as the artificial intelligence (AI) boom has primed demand for the next big technology breakthrough.
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Of the four pure-play quantum computing stocks, Quantum Computing (NASDAQ: QUBT) is the smallest. In the second quarter, revenue came in at $61,000, which was down from $183,000 in the second quarter a year ago. Quantum Computing differentiates itself from other quantum companies by using integrated photonics and quantum optics to create machines for quantum computing and related applications.
Quantum Computing now has a market cap of $2.7 billion, but as you can see from its revenue, that valuation is based almost entirely on hopes for the future, even though it's likely to take years for the company to deliver material revenue. At that valuation, some smaller stocks are better bets than Quantum Computing. Let's take a look at two that look primed to outperform Quantum Computing over the next three years.
Image source: Getty Images.
1. Sweetgreen
Sweetgreen (NYSE: SG) might be a restaurant chain, but the fast-casual salad-focused operator is also making its own effort to tap into technology through its Infinite Kitchen. The Infinite Kitchen is an automated system that preps, measures, and dispenses ingredients for its salad bowls, and the company is rolling them out to new locations and retrofitting existing ones to include them.
Sweetgreen also looks like a good buy right now because the stock has plunged this year on what seems to be primarily short-term challenges. Comparable sales have fallen through the first half of the year due to difficult comparisons, a change in its loyalty program, and broader headwinds on discretionary spending.
However, Sweetgreen still has a long runway ahead of it, as the company only has about 250 locations currently and aims to open more than 1,000 over time. Sweetgreen's restaurants are also popular, as it has an average unit volume, or average sales per restaurant, of $2.8 million, which is close to what Chipotle restaurants, the industry standard-bearer, bring in.
Currently, Sweetgreen is valued at a market cap of just $1 billion, and the stock is trading down 74% this year. If it can recoup just part of those losses over the next three years, the company will top Quantum Computing's current market cap of $2.7 billion.
2. Innodata
Investors have been hungry for AI stocks, but small-cap AI opportunities are hard to find. Innodata (NASDAQ: INOD) is one of the rare ones. The company provides data labeling services, helping companies organize their AI data and best deploy it, making it a competitor of Scale AI, a start-up that was valued at $29 billion in a deal with Meta Platforms. That shows the market for data labeling is substantial.
Innodata currently has a market cap of $2 billion and is growing quickly. Revenue in the second quarter was up 79% year over year to $58.4 million, and it's profitable, with a net income of $7.2 million, up from breakeven in the quarter a year ago.
Innodata stock has broken out in the last few weeks, a sign that investors may be starting to recognize the opportunity in this investment. From its current market cap of $2 billion, topping Quantum Computing in the next few years looks achievable.
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Jeremy Bowman has positions in Chipotle Mexican Grill, Meta Platforms, Nvidia, and Sweetgreen. The Motley Fool has positions in and recommends Alphabet, Chipotle Mexican Grill, Meta Platforms, and Nvidia. The Motley Fool recommends Sweetgreen and recommends the following options: short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.