D-Wave Has Many Positive Attributes, But There’s a Better Name in the Quantum Sector

There's a great deal to like about quantum firm D-Wave (QBTS), including its promising technologies, its rapidly growing bookings and backlog, the investment that it received from the U.S. government, and its impressive list of customers.

However, Quantinuum (QNT), whose IPO was launched by majority owner Honeywell (HON), also has all of these attributes. However, its revenue, backlog, and cash reserves are meaningfully larger than those of D-Wave. Due to these points, I view QNT stock as the better, safer pick for investors for now.

Canada-based investment bank BMO Capital was recently bullish on D-Wave, partly because it has both annealing and gate-model systems. According to BMO, "Having both technologies allows QBTS to address different quantum applications and significantly increases the size of its potential market." Citing Boston Consulting Group, the investment bank reported that D-Wave's addressable market stands at $450 billion to $850 billion. BMO has a $35 price target and an "Outperform" rating on the shares.

In the first half of the year, D-Wave's bookings jumped 1,120% versus the same period a year earlier to $35.5 million, while its remaining performance obligations (RPO), which include backlog and deferred revenue, soared 668% year-over-year (YoY) to $40.7 million as of June 30. During the second quarter, its revenue came in at $3.1 million.

Back in May, Washington agreed to invest $100 million in the firm. Among D-Wave's major customers are Toyota (TM), Deloitte, Mastercard (MA), and Volkswagen (VWAGY). As of the end of the second quarter, it had $546 million of cash.

Quantinuum appears to be making significant progress when it comes to developing systems for the pharmaceutical and medical sectors. Specifically, the firm reported in its second-quarter earnings report that it had "Demonstrated, with NVIDIA and a Fortune 100 pharma company, how AI-driven quantum simulation can potentially enhance molecular property characterization in pharmaceutical applications." And the company stated that it had "Invented a new parallel quantum phase-estimation algorithm for faster and more precise determination of molecular properties, with broad applications including pharmaceuticals, life-sciences, and energy." In the medical field, it's working on enhancing MRIs.