Soaring Quantum Computing Stocks and Growing Doubts

On April 29, Kerrisdale Capital, a U.S. research-driven investment firm, published a report alleging fraud at D-Wave Quantum Inc. (QBTS), widely regarded as a frontrunner in the quantum computing industry, and arguing that the company’s stock is overvalued. The core claim is that the company is failing to generate meaningful revenue, is struggling to secure customers, and therefore has virtually no chance of commercial success.

The report bluntly states that quantum annealing, the core technology D-Wave promotes, offers no particular advantage over classical computers for solving optimization problems. According to the report, this technology was actually developed decades ago and has already fallen out of use in the industry.

Multiple academic studies have found that this computational approach offers little to no scaling benefit, and interviews Kerrisdale conducted with customers in key industries such as logistics, manufacturing, and pharmaceuticals also confirmed that D-Wave’s technology provided them with no meaningful advantage.

At the heart of the fraud allegations is D-Wave’s so-called "murky" hybrid computing approach, which mixes quantum and classical computation. A former engineer told Kerrisdale in an interview that there is “no evidence that D-Wave’s technology is faster for optimization problems” and that it is “nothing more than a key marketing pitch for the company.” According to former researchers and employees interviewed, this hybrid computing approach is “in practice a structure where most of the computation is actually performed on classical computers.”

D-Wave’s claim that it has demonstrated quantum supremacy in problems related to simulating magnetic materials is also under fire. Critics argue that similar problems are already being solved effectively on classical computers, and that the problems in question have little real-world applicability in the first place.

After the report was published, D-Wave reported first-quarter 2025 revenue that was up more than 500% year-on-year in its May 8 earnings release, sending the stock price soaring.

The company said the main driver of revenue growth was increased sales of its quantum computing systems, which appears to reflect a rise in organizations and companies purchasing D-Wave systems for R&D purposes as interest in quantum computers grows. In its earnings materials, the company repeatedly cited various case studies to argue that quantum computing is superior to classical methods (quantum supremacy), but it remains unclear whether these systems actually helped enterprises solve real-world problems in a way that translated into revenue.

It is, of course, important to remember that Kerrisdale stands to profit if D-Wave’s share price falls, since it is short the stock. But this is not an issue that can be dismissed as a problem unique to one company. Other quantum computing players such as IonQ, Quantum Computing Inc., and Rigetti Computing have also faced similar allegations of misleading investors or running questionable business models.