Bull of the Day: D-Wave Quantum (QBTS)

D-Wave Quantum QBTS shares soared over 25% on Tuesday after the company announced its next-generation Advantage quantum computing system.

Featuring D-Wave's most advanced quantum processor to date, the Advantage2 system is commercial-grade, and built to address real-world use cases in areas such as optimization, materials simulation and artificial intelligence (AI).

But the immediate breakthrough might be that customers will be able to access Advantage2 initially only through D-Wave's Leap cloud service. This marks the first instance of quantum-as-a-service.

Quantum Completes the Triumvirate

D-Wave CEO Alan Baratz emphasized in the company's Q1 earnings release two weeks ago that they "became the first to demonstrate quantum supremacy over classical computing on a useful real-world problem."

From the May 8 press release...

Published the peer-reviewed paper “Beyond-Classical Computation in Quantum Simulation” in Science, validating D-Wave’s demonstration of quantum computational supremacy on a useful real-world problem. This research showed that D-Wave’s annealing quantum computer was able to perform a magnetic materials simulation in minutes that would take nearly one million years and more than the world’s electricity supply on one of today’s most powerful classical supercomputers, the Frontier massively parallel, GPU-based exascale supercomputer at the Oak Ridge National Laboratory. 

This claim met resistance from some technology observers who debated the apples vs. oranges comparisons. But the accomplishments of D-Wave should not be so easily dismissed as there is definitely a "there, there" under the surface. 

As we learned from NVIDIA NVDA CEO Jensen Huang and other quantum experts recently at the first ever NVIDIA Quantum Summit in March, the world's most advanced computers will use a combination of CPUs, GPUs, and QPUs, or quantum computing units.

QPUs are not only very far from competing with GPUs, they will likely never replace them. And Jensen made sure everyone knew that when he graciously invited those leaders for a pow-wow, a month after completely dismissing the nascent industry.

You can learn more about that exciting and controversial event in a podcast I did with Neena Mishra in March...

Quantum Computing: Tech's Next Giant Leap?

D-Wave's outspoken CEO Baratz sat next to Jensen and you could only cut the tension with a laser. But Baratz had already acknowledged that quantum systems will work in tandem with GPU-based AI, and he proved it with the company's first big sale in February.

D-Wave made a big splash in the quantum computing space with their first sale of an Advantage annealing quantum computing system to a high-performance computing (HPC) center, the Jülich Supercomputing Centre (JSC), about 54 kilometers west of Cologne, Germany.

As Europe’s first and only exascale HPC, the JSC JUPITER supercomputer will utilize D-Wave's Advantage system to facilitate breakthroughs in AI and quantum optimization applications.

JUPITER is expected to surpass the threshold of one exaFLOP, or one quintillion floating point operations per second. This will be the world’s first coupling of an annealing quantum computer with an exascale supercomputer, providing a first-of-a-kind opportunity for tackling the world's toughest computational problems.

Advantage2 Raises the Bar

The Advantage2 system is expected to deliver significant performance gains and efficiency with doubled coherence, increased connectivity and a 40% boost to the energy scale for advanced problem solving.

In addition to the Jülich Supercomputing Center, the Los Alamos National Laboratory (LANL) has already been using prototypes of the new Advantage2 system to advance their research. A LANL engineer and Dale Moore, President and CEO of defense contractor Davidson Technologies, both were quoted in the press release regarding their enthusiasm for continued R&D.

Davidson, located in Huntsville, Alabama is a trusted provider of advanced engineering and technical solutions supporting the U.S. Department of Defense, intelligence community, and aerospace industry. With a focus on mission-driven innovation, Davidson combines deep domain knowledge with emerging technologies to solve the nation’s most complex defense challenges.

Ahead of this announcement, QBTS shares were already a Zacks #2 Rank because EPS estimates had moved significantly higher between the company's last two quarterly reports, with the full-year 2025 bottom line rising from a loss of 38-cents to only -$0.21.

After the Q1 sale to JSC, D-Wave had bragging rights of a 500% jump in revenues on an admittedly small base. Before Tuesday's announcement, full-year 2025 sales were projected to cross $25 million, representing 183% growth.

So it's fair to say that with a meteoric 125%+ gain in just 9 trading sessions, investors will be looking for increased sales and clarity on the expected delivery of physical Advantage2 systems -- or if margins will be better with the Leap cloud service.

Large hyperscalers (think Microsoft, Google, Amazon, Oracle, and even Meta and Tesla) and other supercomputing research centers aiming to integrate quantum computing into their infrastructure will definitely want the Advantage2 system in a dedicated on-premise configuration.

Qatar Goes Full Quantum

Another fortunate trade wind for D-Wave this past week may be the sizable investments and partnerships being lavished on a private competitor.

Quantinuum, the private quantum-computing company majority-owned by Honeywell, finalized a $1 billion agreement with a Qatari investment firm last week. That number is spread over a decade, but it does show a commitment to the technology that has not been seen in the revenues of any of the companies yet.

It was thought last year that Quantinuum might fetch a valuation as high as $10 billion if it IPOs this year. That estimate is probably higher now, and driving more investors to bet on the ponies already running on the public track, including Rigetti Computing RGTI and IonQ IONQ.

Rigetti was a big winner for members of my TAZR Trader portfolio recently where we took gains of 1,340% and 703%. And IonQ has been of particular interest in my special report Beyond AI: The Quantum Leap in Computing Power because it utilizes the same technology approach as Quantinuum known as "trapped ion" computation.

After Tuesday's rally in D-Wave shares, TAZR is sitting on open gains of over 1,600% in QBTS.

Future's So Fast, You Gotta Wear a Helmet

Writing for Barron's on May 15, Mackenzie Tatananni explained the "ramping global demand" for the technology.

"Quantum computing is often seen as a speculative bet by investors and detractors could argue that its appearance alongside sectors like defense and energy was a surprise. However, the announcement was just another sign that enthusiasm for the technology continues to mount, both in the U.S. and abroad."

Quantinuum said its joint venture agreement with Al Rabban Capital would accelerate the adoption of quantum technology in Qatar and the surrounding region.

The 10-year investment horizon includes training new developers and enabling access to Quantinuum's systems. As we've learned with NVIDIA, getting developers on-board and building in the platform ecosystem is key to further adoption across corporations and countries.

The partners plan to develop regional-specific uses of quantum in fields such as finance, precision medicine, and genomics, both for academic and industrial clients.

Bottom line: While the stock valuations of QBTS, RGTI, and IONQ may be ahead of their revenues, there is excitement among investors big and small, from Qatar to Queens, that QPUs will change the world as fast GPUs in the coming decade.

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This article originally published on Zacks Investment Research (zacks.com).

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