Mad Hedge Technology Alerts!
According to IBM, Quantum computing is a rapidly-emerging technology that harnesses the laws of quantum mechanics to solve problems too complex for classical computers.
Used correctly, quantum computers are incredibly fast and effective. They can perform calculations in a few seconds for which today's supercomputers would need decades or even millennia. This fact is also referred to by experts as quantum superiority.
Why Buy Quantum Computing Stocks?
Quantum computing isn’t as crazy as you think and it’s inching closer to reality.
These types of transcendent technologies are what investors need to key in on to help make their tech stock portfolio better than ever.
This will enable researchers to break new ground in areas such as pharmaceutical drug discovery, weather forecasting, cybersecurity, and computational chemistry.
It will also result in unprecedented gains for owners of quantum computing stocks.
The Best Quantum Computing Stocks
Will quantum computing be successful? That's the multi-trillion dollar question.
We're in the first innings of a long ball game, if the game has even started.
Still, there are already some pioneers that are re-imagining the field.
Here are two quantum computing stocks to put on your radar:
Rigetti Computing, Inc. (RGTI)
Rigetti Computing builds and deploys integrated quantum computing systems leveraging superconducting qubit technology.
CEO Chad Rigetti has a simple and clear thesis on this space: “In the next decade, a single Rigetti quantum computer could be more powerful than the entire global cloud industry today.”
Rigetti will need the capital infusion from going public because the firm doesn’t have any positive revenue to talk about. The IPO delivered a much needed financial lifeline and the additional $458 million in funding came after an initial $200 million was raised previously. That could also be a big con about the sub-sector, in might be years until an actual profitable income stream is built.
Whoever said that Rome was built in one day.
Quantum computing is only at the beginning of its development. It is difficult to estimate how large the market demand for this product will be. It's also uncertain how quickly Rigetti or competitors like IonQ will be able to expand their technical capabilities. This is an entirely new technological territory, so there are zero guarantees here in this tech sub-sector.
Needless to say, Rigetti is a concept stock for now. One has to believe in the underlying vision of quantum computing to place a bet here. Otherwise, it would be wise to switch to other stocks without a quantum computing business plan or corporate strategy.
IonQ (IONQ)
IonQ produces quantum hardware and software.
IonQ was faster to market than Rigetti, making it the first publicly traded quantum computer stock. Also, the company is backed by a number of influential investors including Bill Gates, Silver Lake, and Fidelity.
Unfortunately, like many SPACs these days, IonQ only exists on paper. That means there is still very little operational business. IonQ only did a few million in revenue last year and had no revenue in 2019 or 2020. In fact, free cash flow is projected to remain negative through at least 2026. Also, it will take multiple technological leaps - such as machine learning - to reach a point where quantum computing could reach mass markets and make IonQ successful.
RGTI’s market cap is only $125 million and IonQ’s is $927 million and they are cheap for a reason.
Investors aren’t willing to pay up for the time it's willing to take for quantum computing to go mainstream yet.
However, if a reader is willing to invest with a 35-year view, then it would make sense to invest 1% of one’s portfolio into these names and also at a time when interest rates are trending lower.
These types of loss-makers and far in the future bets work better when the cost of capital is lower.
Mad Hedge Technology Letter
February 17, 2023
Fiat Lux
Featured Trade:
(MAKE FACEBOOK GREAT AGAIN)
(META), (APPL)
Well, it doesn’t have to be the 2008 version, but Meta (META) CEO Mark Zuckerberg needs to go back to his roots, because this metaverse thing isn’t going to work out.
And if it does, it will be miles into the future.
For quite a few years now, Zuckerberg has focused on his pet project as if it's his real business.
That’s when the trouble started.
He even renamed his company after his new pet project - the Metaverse.
It's a vague concept that can describe a number of things, but broadly it's the idea of people connecting through virtual worlds rather than a traditional social network.
Meta's big move into the Metaverse was a catastrophe, resulting in a mediocre experience, increasingly expensive headsets, and a stock plunge of over 60% in 2022.
Even though Meta’s stock has experienced a dead cat bounce in 2023, it doesn’t make up for the stagnation of the business model.
What should Zuck do?
He should slow down and focus on strengthening his company's core apps, Facebook, Instagram, and WhatsApp.
While Meta poured $15 billion into its Metaverse project, the other apps were noticeably neglected.
Meta should boost engagement and revenue from these apps, which have billions of users worldwide. Meanwhile, Horizon Worlds, Meta's flagship Metaverse app, only has a pitiful 200,000 monthly active users.
Even though Instagram has faced headwinds of late, it's still Meta's crown jewel. Keeping users happy with the app and laying out a plan for the years to come should be the company's top priority.
Meta should spend its time and energy monetizing that usage as much as possible without alienating users.
The company should do the same with WhatsApp, the world's most popular communication app.
The platform does not contain advertising to preserve its identity as a user-friendly service.
However, Meta has promised to use its popularity in other ways to increase revenue, including with paid features.
But instead of focusing on its proven uses, Meta is investing billions of dollars in an idea that may not pay off for five or 10 years.
Left unaddressed, a bet of this magnitude risks alienating investors and employees while they face economic challenges.
Apple (APPL) was one of the main reasons for the swan dive in ad revenue. Last year, the tech giant rolled out a privacy change for iOS, asking users if they didn't want to be tracked on other companies' apps as well. Meta responded at the time by saying that advertisers "may see an overall decline in ad performance and personalization and an increase in cost per action."
To stave off competition, Zuckerberg is attempting to invent the next future platform.
The issue I take with this pivot is that Zuck thinks it’s a lay-up, but I believe it’s something closer to a Hail Mary.
It’s rarely the incumbents who invent the next big platform, which is why Zuckerberg's metaverse vision is more suited to a VC-funded startup than a company-wide rallying cry.
Apple has also been exploring future platforms, albeit far more quietly than Meta (its own VR headset is rumored to roll out in June 2023).
Apple’s stock price has ground sideways while Meta has borne the full brunt of investor skepticism.
That hasn't stopped Zuckerberg from making his Metaverse foray into a contest between Meta and Apple, which of course takes up a lot of space.
Ultimately, the smart move here would be for Zuckerberg to take a page out of Apple's book by prioritizing the tried and tested cash cows to keep investors happy and relegate the Metaverse stuff to the dustbin of history.
The stock has doubled since October 2022 and Meta should improve on its self-labeled “year of efficiency.”
I do believe Meta shares will rise from here if they keep firing staff and simplify the platform.
They still employ over 86,000 people and I believe they can streamline down to 25,000 employees.
