IonQ, Rigetti Computing, D-Wave Quantum, and Quantum Computing Inc. Are Sending Shockwaves Through Wall Street With This $895 Million Warning

Although the artificial intelligence infrastructure build-out is the stock market's hottest trend, it's not the only innovative trend driving up equity valuations.

Excitement for the evolution and real-world application of quantum computers is building on Wall Street. Over the trailing two years, shares of pure-play quantum computing stocks IonQ (NYSE:IONQ), Rigetti Computing (NASDAQ:RGTI), D-Wave Quantum (NASDAQ:QBTS), and Quantum Computing Inc. (NASDAQ:QUBT) have soared by approximately 400%, 1,820%, 1,670%, and 1,200%, respectively.

While the signing of contracts and the forging of early-stage partnerships have produced life-altering gains for this pure-play quartet, the outlook for quantum computing stocks isn't as rosy as their trailing two-year returns imply. The people who know IonQ, Rigetti, D-Wave, and Quantum Computing best are sending the wrong signals to Wall Street.

Quantum computing pure-play insiders are sending shockwaves through Wall Street

Though Wall Street analysts spend their days better understanding the ins and outs of the companies and industries they cover, no individuals understand these four pure-play quantum computing stocks better than their insiders.

An "insider" is a high-ranking executive, board member, or beneficial owner of at least 10% of a company's outstanding shares who may possess non-public information. For transparency and to comply with securities law, insiders are required to report any transactions in their company's stock within two business days.

It's the insider trading activity for Wall Street's hottest quantum computing stocks that's sending shockwaves through Wall Street. Over the trailing two years, insiders have been steady sellers:

• IonQ: $454,454,505 in net selling
• Rigetti: $75,684,992
• D-Wave: $331,141,697
• Quantum Computing: $33,840,754

Collectively, insiders at these scorching-hot quantum computing companies have sold $895.1 million more in shares than they've purchased since Sept. 18, 2024.

The caveat to the above net-selling activity is that most high-ranking executives and board members are primarily compensated in shares and/or stock options. The federal and/or state tax liability associated with this compensation requires shares to be sold. Insiders selling for tax purposes or to diversify their investment holdings aren't a red flag.

But the other side of this coin is just as important. Whereas several reasons exist to sell a stock, not all of which are bad news for investors, there's only one reason to be a buyer: the expectation that the shares will appreciate. Insider buying at this quantum computing quartet has been almost nonexistent over the trailing two years:

• IonQ: $2,254,294 in insider buying
• Rigetti: $0
• D-Wave: $1,795
• Quantum Computing: $0

If insiders aren't buying, ask yourself, "Why should retail investors?"

IONQ PS Ratio data by YCharts

History may offer a clue (or two) as to why quantum computing insiders aren't buyers. Over the last three decades, no companies at the forefront of a game-changing technology have sustained a price-to-sales (P/S) ratio above 30 for any extended period. As of Sept. 18, the trailing 12-month P/S ratios for these pure-plays stocks were in clear bubble territory:

• IonQ: 55.7 P/S ratio
• Rigetti: 391.2
• D-Wave: 494.1
• Quantum Computing: 183.3

Furthermore, every game-changing technology for three decades has endured an early-innings bubble-bursting event, brought about by investors overestimating the pace of adoption and/or the optimization of innovations. Next-big-thing technologies need ample time to mature, and quantum computing is nowhere close to a proven and optimized innovation.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.