MW Jensen Huang crushed the quantum stocks, and now the so-called 'Pharma Bro' is going for the kill
By Jamie Chisholm
Martin Shkreli says he's short the likes of Rigetti Computing as current market resembles the dotcom bubble
Welcome to jobs Friday. The December nonfarm payrolls report arrives with arguably greater than usual heft as equity investors appear increasingly nervous about surging government bond yields amid signs of revived inflation.
The S&P 500 sits 2.8% below its record close hit just over a month ago after the 10-year Treasury this week rose above 4.70% for the first time since April. A payrolls number that is not to cold or not too hot may boost trader sentiment.
However, one bubblicious sector of the stock market may struggle to rally regardless of whether the jobs numbers give equity bulls what they want.
Small quantum computing stocks dived this week after Nvidia $(NVDA)$ CEO Jensen Huang made clear to investors what they should have already known. Talking to analysts at the CES convention in Las Vegas on Tuesday, the executive said that "very simple quantum computers" could still be 20-years away.
The reaction among quantum stocks favored by retail investors in particular was swift and brutal. Shares of Rigetti Computing (RGTI), which in the previous three months, for example, had surged more than 2,000% tumbled around 45%, Quantum Computing $(QUBT)$ slid 43%, IonQ $(IONQ)$ plunged 39%, and D-Wave Quantum $(QBTS)$ dived 36%.
However, that still leaves many of these stocks with huge gains over recent months. Again, looking at Rigetti, its stock was less than a buck in October, and by close on Thursday was $10.04.
And that means such stocks should continue to be sold short, according to Martin Shkreli, the investor who was sent to prison for securities fraud and whose defense of sharp drug price hikes by a company he controlled earned him the nickname "Pharma Bro."
In a long message on X this week, Shkreli said quantum computing stocks "are so humorously overvalued, they conjure the dot-com bubble." Several of them had downside of 90% or more, he added.
Shkreli's X message contained an explanation of quantum theory and its use in computing. He applied his reasoning to the four companies noted above and their various approaches to utilizing the technology.
IonQ gets Shkreli's respect for its "academic achievements" and he noted the company's revenues appear to be growing, with $41.6 million in annual revenue for 2024, according to FactSet estimates. "The company has talked about putting out a 100-qubit computer called Tempo by the end of this year. Unfortunately, IBM is already far ahead of this scale," he said.
Still, Shkreli has a fair value of $11.23 for IonQ. Though that's way below the current $30 share price it still implies the company has prospects. In contrast, fair value for Rigetti he says is $1.00, while he considers D-Wave and Quantum Computing, which had revenue of just $101,000 in the third quarter, have fair values of 1 cent apiece.
In a message dated December 8, Shkreli said he was short IonQ and Regetti - though he didn't say at what level he sold. Anyway, he's maintaining the strategy.
In this week's missive he said: "For those who want me to cut to the chase: I recommend shorting D-Wave Systems, Rigetti, IonQ and Quantum Computing Inc".
And he added that he doesn't think quantum computing will be material to Alphabet $(GOOG)$ or IBM $(IBM)$. "The misunderstanding seems to be the idea that quantum will 'change everything'. No. It will help a few nerdy people, like me, study cryptography and odd, but useless mathematical problems, more easily. That is not a big industry," he concluded.
Markets
U.S. stock-index futures (ES00) (YM00) (NQ00) are mildly mixed while benchmark Treasury yields BX:TMUBMUSD10Y rise. The dollar index DXY is holding near multi-month highs, while oil prices (CL.1) jump and gold (GC00) is trading around $2,680 an ounce.
Key asset performance Last 5d 1m YTD 1y S&P 500 5918.25 0.62% -2.73% 0.62% 23.72% Nasdaq Composite 19,478.88 0.87% -2.78% 0.87% 30.12% 10-year Treasury 4.698 9.60 30.20 12.20 75.43 Gold 2709.2 2.13% 1.62% 2.65% 31.93% Oil 75.68 2.17% 6.46% 5.30% 4.01% Data: MarketWatch. Treasury yields change expressed in basis points
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The buzz
The December nonfarm payrolls report will be published at 8:30 a.m. Eastern. Economists forecast that a net 155,000 jobs were added, down from 227,000 in November. The unemployment rate is expected to remain at 4.2%, while month-on-month hourly wages will grow 0.3% against 0.4% in November.
Other U.S. economic data due on Friday include the University of Michigan consumer sentiment report at 10:00 a.m.
Nvidia (NVDA) stock was impacted by a Bloomberg report saying the White House will introduce new restrictions on artificial intelligence chip exports.
U.S.-listed shares in Taiwan Semiconductor Manufacturing $(TSM)$ are up more than 1% after the world's largest chip maker reported record revenue in the last quarter of 2024.
The Supreme Court will hear an appeal from TikTok on a looming U.S. ban that could impact rivals Meta Platforms $(META)$ and Snap (SNAP).
Shares of insurers including Chubb $(CB)$ fell, while homebuilders including Toll Brothers $(TOL)$ rose, after the fires that hit the Los Angeles area.
The People's Bank of China said it will stop buying the country's government bonds after yields fell to a record low.
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The chart
Here's a worrying chart for crypto enthusiasts, courtesy of Kim Kramer Larsson, analyst at Saxo Bank.
"Bitcoin forming a Shoulder-Head-Shoulder top and reversal pattern not yet confirmed. A break below Neckline support at around 90,680 will confirm with downside potential to 73,000," he says.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker Security name GME GameStop TSLA Tesla NVDA Nvidia HOLO MicroCloud Hologram RGTI Rigetti Computing MSTR MicroStrategy PLTR Palantir Technologies NIO Nio MVST Microvast Holdings QBTS D-Wave Quantum
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-Jamie Chisholm
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(END) Dow Jones Newswires
January 10, 2025 06:46 ET (11:46 GMT)
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