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D-Wave stock fell more than 6% today, but its sell-off could have potentially been much worse.
The broader market saw big valuation pullbacks in response to Greenland-related news, but D-Wave stock was likely buttressed thanks to another quantum player's contract win.
D-Wave Quantum (NYSE: QBTS) stock got hit with a substantial sell-off Tuesday. The quantum computing company's share price fell 6.2% in the session and had been down as much as 10% earlier in trading.
Given D-Wave's extremely growth-dependent valuation, the company's valuation pullback today actually looks relatively modest in light of bearish trends across the broader market. The S&P 500 fell 2.1% in today's trading, and the Nasdaq Composite declined by 2.4%.
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Image source: Getty Images.
Investors sold out of stocks today in response to dynamics related to the U.S.'s attempts to acquire Greenland. President Donald Trump has said that the U.S. will be applying new tariffs on a selection of European countries in response to opposition to acquiring the territory. In turn, the EU has said that it would respond with its own retaliatory tariffs.
The evolving trade dynamics prompted a sharp pullback for equity valuations today, and growth stocks were particularly hard hit. D-Wave Quantum's valuation pullback actually looks relatively muted given its highly growth-dependent valuation profile. The stock likely proved to be relatively resilient thanks to news that fellow quantum pure-play specialist Rigetti Computing announced a new $8.4 million contract win.
Given geopolitical volatility and macroeconomic uncertainty, D-Wave Quantum stock looks like a very risky buy right now. With a market capitalization of roughly $9.5 billion, the company is valued at approximately 238 times this year's expected sales.
While the company has demonstrated some promising strengths in the quantum-computing space, its extremely forward-looking valuation opens the door for huge downside volatility. With big risk factors along macroeconomic and geopolitical lines multiple lines adding to uncertainty connected to D-Wave's ability to execute in a highly speculative emerging tech category, only investors with very high risk tolerance should consider investing in the stock right now.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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