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5 days ago
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We are short shares of D-Wave, a $2 billion quantum annealing company whose stock has surged more than 600% since investors began chasing anything remotely associated with next-gen computing last year. While the broader market looks to gate-model quantum systems as the industry’s future, D-Wave continues to promote its fundamentally different annealing architecture. Shares currently trade at over 57x consensus 2026E revenue – a ridiculous multiple for a company that has never generated more than $9 million in annual recurring revenue, has no clear path to profitability, and is already seeing customer growth stagnate as its approach is increasingly recognized as a commercial dead end. D-Wave is riding quantum hype, but with a core technology that cannot stay afloat.
D-Wave’s business is built around quantum annealing, a niche offshoot of quantum computing developed decades ago and largely abandoned by the industry. Despite marketing its systems as optimized for complex real-world optimization problems, quantum annealing has failed to demonstrate a clear performance edge over classical solvers. Encoding problems for D-Wave’s hardware requires cumbersome and lossy reformulations that inflate problem size and introduce instability, while the system’s limited qubit connectivity forces users to spread logical variables across fragile chains of physical qubits. Strip away carefully worded press releases and as a former D-Wave engineer admitted to us, “there is no proof that any optimization problem is solved faster” using D-Wave’s quantum systems. Multiple academic studies have shown little to no scaling advantage over classical methods making it no surprise that a wide range of D-Wave customers we interviewed in key verticals like logistics, manufacturing, and pharmaceuticals reported seeing zero benefit from the technology.
To compensate for the shortcomings of its quantum technology, D-Wave leans heavily on so-called “hybrid” solutions which combine its annealer with classical hardware and algorithms to tackle industrial-scale problems. But in a glaring red flag, the company refuses to disclose to customers the relative contribution of each. Why? Because according to former insiders who developed and deployed these solutions, “hybrid” in practice means “almost entirely classical.” The quantum component is minimal – often cosmetic – and its added value, beyond marketing puff pieces, was debated even internally.
Meanwhile, D-Wave’s gate-model pivot appears both reactionary and stalled. After years of dismissing gate-based systems as impractical, the company abruptly reversed course in 2021 amid a surge of investor interest in gate-model competitors like IBM and Google. Over three years later, D-Wave has released no detailed architecture papers, no fidelity data, and no performance benchmarks. D-Wave’s absence of a gate-model roadmap leaves it clinging to a fading technology while the rest of the industry passes it by.
Even D-Wave’s most recent highly publicized research lacks commercial relevance. Last month, the company declared quantum supremacy on a “useful, real-world” problem – an assertion dismissed by physicists we spoke with as misleading. The benchmark was a toy problem engineered to align with D-Wave’s hardware constraints, bearing little resemblance to real-world magnetic materials. D-Wave is not a leading quantum company, it’s a struggling provider of uncompetitive optimization solutions. As investors wake up to this reality, the stock’s rally will unwind, and its valuation will collapse under the weight of physics, finance, and fact.
Read our full report here.
