Quantum Computing Just Had Its First Big IPO, but Is the Stock a Buy?

Quantinuum (QNT +4.88%) became the first-ever quantum computing pure play to join the market via an initial public offering (IPO) when it debuted earlier this month. Before that, all quantum computing companies had come to market via SPAC (special purpose acquisition company) transactions -- reverse mergers with publicly traded shell companies. The company originally proposed selling just over 21 million shares at somewhere between $45 and $60, before upping that to 26.5 million shares at between $53 and $55. The stock opened trading at $68 on June 4, above its eventual $60 IPO price, before closing its first day of trading up just 1% at $60.36. However, it fell below its IPO price on just its second day of trading. As of midday Monday, the stock was trading a hair above the $60 mark. Assuming the exercise of share overallotments, the deal valued the company at just under $16 billion, which would make it one of the largest pure-play quantum computing stocks by market cap. That's bigger than companies like D-Wave Quantum and Rigetti Computing, but smaller than IonQ (IONQ +10.51%), which is currently valued at over $25 billion. ExpandNASDAQ: QNTQuantinuumToday's Change(4.88%) $2.75Current Price$59.01Key Data PointsMarket Cap$15BDay's Range$57.50 - $61.7052wk Range$51.15 - $71.35Volume2.1KAvg Vol11.3M A full-stack quantum computing platform Quantinuum describes itself as having a full-stack quantum computing platform. The company was created out of the merger of Honeywell's quantum computing unit and Cambridge Quantum in 2021. Honeywell continues to hold a majority stake in the company and remains a key partner and customer. Similar to IonQ, Quantinuum has forgone the use of superconducting qubits -- a more commonly used technology in the space -- and instead opted to pursue trapped-ion technology. This technology creates its qubits using individual electrically charged atoms (ions), and they tend to be more stable and less prone to error than superconducting qubits. While quantum computing will conceivably be able to handle certain types of extremely complex processing in a fraction of the time of today's most powerful supercomputers, one of the biggest obstacles that the technology's developers will need to overcome is that quantum computers are dramatically more prone to errors than the classical computers we use every day. The reason is that the technology relies on qubits instead of traditional computer bits. Bits can only have values of 0 or 1, while qubits can be held temporarily in what is called a state of superposition, in which their value is neither 1 nor 0, but a complex probability amplitude. Experts often use the analogy of a qubit being like a spinning coin, which has the potential to be heads or tails. That coin is then strung together with other spinning coins. How one qubit reacts instantly impacts the associated qubits through what is referred to as entanglement. However, every form of qubit is extremely sensitive to outside interference. Tiny shifts in temperature, vibrations, or an interaction with a stray particle can take them out of their probability state and into their final 1 or 0 state -- and possibly the wrong one. That delicateness is why the technology is error-prone. Using trapped ion qubits has proven to produce more accurate results than other types of qubits, and Quantinuum has achieved 99.92% 2-qubit gate fidelity (accuracy) with its systems. While that might sound extremely accurate in some contexts, in the world of computing, it's not -- the average computer chip in your smartphone or PC has an error rate of far less than 1 in a quadrillion. So Quantinuum has a long way to go. It also trails IonQ, which has achieved 99.99% 2-qubit gate fidelity with its systems. One big difference between the two companies' approaches is that IonQ has begun incorporating microwave signals directly into its chips to hold the trapped ions in place, while Quantinuum uses only lasers. The company argues that microwave gates are slow compared to laser-based gates and that speeding them up drastically increases the amount of power the systems demand. Quantinuum also believes its software stack, consisting of TKET, Guppy, and Nexus, gives it an advantage. TKET, which was created by Cambridge Quantum, is a quantum software development kit that acts as a universal translator. Its compiler can optimize applications across an array of quantum systems, regardless of what types of qubits they use. Guppy, meanwhile, is an open-source quantum computing language that can handle advanced error correction directly in the code. Finally, Nexus ties everything together in a cloud-based operating system. Image source: Getty Images. Is the stock a buy? Like all other quantum computing pure-play stocks, Quantinuum is a speculative bet at this point. Its revenue is extremely modest compared to its valuation, and it's losing money and burning cash. However, quantum computing is more about which technology eventually comes out on top. I feel the most optimistic about the trapped-ion approach it is pursuing, given its accuracy edge, and the company does have an impressive software stack. It's also a bonus that it is backed by Honeywell. With the stock trading close to its IPO price, I wouldn't be rushing to buy it, but it could be worth adding a small position to your portfolio if it slides from here.