Key Points
The U.S. Department of Commerce has used CHIPS Act funds to buy $100 million minority stakes in Rigetti, D-Wave, and Quantinuum.
The money will fund specific technical work -- Rigetti's cooling and chip-connectivity projects, D-Wave's supply chain and scaling, and Quantinuum's domestic manufacturing partnerships.
These stocks are priced based on the assumption that the companies will become large, profitable businesses, but even if that happens, it might not occur on the timelines that the market is pricing in.
Rigetti Computing (NASDAQ: RGTI), D-Wave Quantum (NASDAQ: QBTS), and Quantinuum (NASDAQ: QNT) all officially have a new backer: the U.S. government.
On Tuesday, all three companies announced that they had finalized funding agreements with the Commerce Department. In exchange for up to $100 million each in funds earmarked for R&D and commercialization under the CHIPS Act, the government will receive ownership stakes in the three quantum computing pure plays. Those won't be controlling stakes. However, the finer details, like exactly how large the government's stake in each company will be, have not been revealed.
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Let's take a look at what each company is planning on doing with the investments.
Rigetti's $100 million targets chip cooling and connectivity
Rigetti says it plans to use the money to "address major technical bottlenecks in scaling superconducting quantum computing" and that it "will accelerate the Company's roadmap toward utility-scale quantum computing." Its plans include improving the dilution refrigerators that keep its computers cooled to temperatures near absolute zero (a necessity for the circuits to become superconductors), and developing ways to manufacture more interconnected chips.
D-Wave's award funds its supply chain and system scaling
D-Wave says its funding will go toward "expanding domestic quantum capabilities, strengthening the underlying supply chain, and bringing increasingly powerful quantum systems to market." The company says it is focused not solely on "breakthrough research," but also on making that research practically useful, scalable, and -- critically -- commercially viable.
Quantinuum adds GlobalFoundries and Monarch Quantum as manufacturing partners
Quantinuum says the money it receives will "support R&D that the company expects to help strengthen and diversify its supply chain," including bringing on board domestic manufacturers for some of its hardware. Like D-Wave, Quantinuum emphasized the path to commercialization and the need to make its supply tech both "scalable" and "reliable."
Multibillion-dollar market caps mean the funding changes little for investors
It's telling that each of these companies emphasized their focus on the path to commercialization in their press releases. Ultimately, for an investor, that is what will matter. Government support is helpful and can provide some level of financial stability in what are still the early days of quantum computing's development. However, investors should not confuse these announcements with a confirmation that commercially viable quantum computing is just around the corner.
Rigetti, D-Wave, and Quantinuum are still very much in the research and development stage. The specific projects and improvements they listed are ultimately necessary steps toward bringing the technology to market in a commercially viable way, but the day when the first one will do so isn't necessarily near.
Image source: Getty Images.
A company can ultimately deliver on its technology and still disappoint investors if its stock price assumes a large, profitable business will arrive much sooner than it actually does. These companies are already trading at valuations that price in their eventual success. I think investors are expecting too much too soon from quantum computing companies.
So, ultimately, while the CHIPS Act money they're receiving will help Rigetti, Quantinuum, and D-Wave continue their efforts to build broadly useful quantum computers, I don't think the government's stakes will change much about the investment thesis for any of them.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.