By Mackenzie Tatananni

D-Wave Quantum "will be profitable before any of the other pure-play quantum companies," according to its chief executive, who refuses to be deterred by volatility in the sector.

D-Wave CEO Alan Baratz is no stranger to emergent technology. Before dipping into quantum, he was an executive at Cisco and IBM as well as the first president of JavaSoft at Sun Microsystems, where he was responsible for bringing the new technology to market.

Baratz has approached the technology sector from the venture investing side, too, briefly serving as a managing director at Warburg Pincus. He joined D-Wave in 2017 and ascended to the role of CEO in 2020 after serging as the company's executive vice president of research and development as well as chief product officer.

D-Wave was commercial years before Baratz's arrival. In May 2011, Lockheed Martin purchased the D-Wave One system, marking the sale of the world's first quantum computer.

The company has since added other customers to its roster, including Nippon Telegraph & Telephone's NTT Docomo and Canadian supermarket operator Pattison Food Group.

Quantum stocks are a volatile group. Such volatility is reflected in D-Wave's share price, with a 52-week low and high ranging from 75 cents to $11.41. The stock closed up 0.3% to $5.83 on Monday,

D-Wave shares have gained 332% over the past 12 months -- and while these gains might seem impressive, they're dwarfed by the growth of Rigetti Computing and Quantum Computing, which surged 788% and 935%, respectively, in the same period.

Hand in hand with explosive growth are sharp declines. D-Wave and peer stocks tumbled last month after Nvidia CEO Jensen Huang said "very useful" quantum was decades away. In the days that followed, similar rhetoric from Meta CEO Mark Zuckerberg caused the stocks to fall again.

Underscoring such dramatic performance is the idea that quantum is an emerging field, colored by misconceptions and misunderstandings. Baratz noted that the D-Wave and its pure-play competitors have a large retail investor component. This, combined with the stocks' tendency to trade on news, is a recipe for instability.

"Over time, as the field becomes more well understood and we see more larger institutional investors in the stock, then it will become a lot less volatile," Baratz said in an interview with Barron's.

Then there's the matter of "news that's often inaccurate," which triggers pronounced swings in the stock price. While Huang's 30-year estimate for the pace of quantum development may have been generous, he wasn't entirely wrong, according to Baratz.

Qubits, or quantum bits, are the basic units of information in quantum computing. They are analogous to bits in classical computers and take the form of atomic particles like ions and photons.

Unlike classical bits, qubits are sensitive to disturbances in their environment that can disrupt their quantum states and, as a result, impede a quantum computer from functioning properly.

As more qubits are added to a system, the rate of errors is likely to increase, as the probability of encountering disruptions grows.

While all quantum computing systems use qubits, different technologies are on different trajectories. D-Wave relies on annealing quantum, which is easier to scale than gate-based quantum, the approach favored by competitors such as Rigetti, IonQ, and even IBM.

"That's why we're at 5,000 qubits a day, and everybody else is at tens to a few hundreds," Baratz explained.

There are fundamental differences between annealing and gate-based quantum, too. The former is suited for optimization problems like workforce scheduling, autonomous vehicle routing, and cargo container loading -- in Baratz's words, "most of the important hard problems" businesses face.

"We have been able to become commercial ahead of everybody else because we just don't have the hard technological problems gate model systems still need to solve," Baratz explained.

D-Wave is also in "a very interesting position" as the only company to offer annealing quantum solutions -- meaning it has a hold on a portion of the market, at least for now, he said.

It may take over a decade to work out persistent kinks with error correction and scaling, Baratz admitted. "(Huang) is not totally wrong if he's careful in distinguishing between the approaches to quantum that are not yet mature and those that are. But he is wrong if he lumps us all together," the CEO said.

Profitability remains a distant goal for quantum pure-plays. Speaking to Barron's last month, Bill Stone, chief investment officer at Glenview Trust, pointed out that most quantum companies are "early in their life cycle," with no reasonable idea of future revenues and profits.

IonQ, for one, anticipates to be profitable by 2030, with sales approaching $1 billion -- a figure that raises eyebrows for Baratz.

"We'll be profitable in a fraction of that," the CEO said. "We have $320 million of cash, so we're well-funded at this point."

Beyond financial goals, Baratz has high hopes for quantum itself. In his view, the technology has two applications -- those that are "evolutionary," like workforce scheduling, and those that are "revolutionary," describing all the unrealized possibilities.

"These are the applications that are going to totally transform industry and society," Baratz said. "These are things like global weather modeling for accurate disaster prediction, or everlasting batteries, or lightweight airplane composites."

D-Wave isn't there yet. "We're commercial, but we're not yet at the point where we're driving those revolutionary applications," Baratz said. "But I'm excited about the opportunity to get there."

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 11, 2025 03:00 ET (08:00 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.