There are four main publicly-traded quantum computing companies, and they all have one thing in common: In the last 14 months, all of them have been the target of activist investors shorting their stock.
This isn’t totally surprising. All four companies—D-Wave Quantum, IonQ, Rigetti Computing, and Quantum Computing Inc.—have market caps in the billions of dollars, which in no way reflect the modest revenues generated by their day-to-day businesses.
Alan Baratz, CEO of the 27-year-old Palo Alto, California-based company, says that short attacks are a hazard of the job. His company was the target of Kerrisdale Capital in April of last year, which argued “there is no proof” that D-Wave’s quantum systems solve complex problems faster than ordinary “classical” computers.
Nearly a year on from Kerrisdale’s broadside, D-Wave’s stock price has tripled, and a defiant Baratz is touting figures that counter Kerrisdale’s accusations: a three-fold increase in revenue, more than 100 paying customers (including a new $10 million licensing deal), and a half-billion-dollar acquisition that will help D-Wave solve one of quantum computing’s thorniest problems.
Fighting off ‘untrue statements and characterizations’
Short-seller campaigns are “really all about somebody who’s shorting the stock trying to make money. So, I think you need to take everything with a grain of salt,” Baratz told Fortune recently. “There were a lot of misstatements and untrue statements and characterizations in the Kerrisdale report, so we just dismissed it.”
Kerrisdale’s attack hinged on a head-turning accusation: “A wide range of D-Wave customers we interviewed in key verticals like logistics, manufacturing, and pharmaceuticals reported seeing zero benefit from the technology,” the report alleged at the time. The stock wobbled for a few days immediately after the report but then rose sharply, from about $6 per share to $15 per share by the end of May 2025.
Baratz says such reports sometimes include “nuggets of truth” but are also often riddled with “mistruth and overstatement.” Kerrisdale’s report, for instance, “quoted somebody who worked for a customer of ours. Turns out they were not even a customer of ours—so it’s that kind of thing that goes on,” he says.
D-Wave’s stock has rebounded since the report, as has its underlying business. It most recently reported $22 million in revenues for the most recent nine-month period, up three times from $6.5 million the year before.
The problem—from the short-seller point of view—is that D-Wave’s market cap is $7.4 billion, far higher than the value of its business. About 16% of its stock is currently held short—far above the average.
Baratz admits that there’s a lot of speculation driving up the value of quantum computing shares: “The total addressable market for quantum is, depending on who you talk to, anywhere in the $200 billion to $1 trillion range. And the companies who actually get to the point where they can capture that are going to be very highly valued, and I think investors are making bets on them.”
From R&D to revenue
One struggle the quantum sector has is emerging from the research phase into the scalable, commercially viable, real-world stage.
The technology is notoriously difficult to make. In “classical” computer chips, the processing “gates,” or “bits,” are conceptually simple: they function like light switches—they are on or off, signaling only a 1 or 0 at any given moment. By contrast, quantum computers use subatomic particles that give off information while in a state of quantum uncertainty, meaning that their gates, or “qubits,” can signal 1 or 0, or both, or neither, all at the same time.
Because qubits can signal information from a “superposition” that gives off both or all states of information at once, they can potentially be more powerful as computers than classical chips. But with all that extra information comes errors, and error-correcting a quantum qubit—weeding out the noise to find the signal—is a challenge in itself.
D-Wave admits as much in its most recent annual report: “Building quantum computers requires advances in both science and engineering, and we may not have the ability to deliver those advances,” it says. Future generations of its equipment “may be delayed or may never be delivered … our technical roadmap may be delayed or may never be achieved,” it said.
D-Wave is moving to reduce that risk. Last month it acquired for $550 million Quantum Circuits (QC), a maker of superconducting quantum gate computers spun out of Yale University. Baratz believes the company’s founder, Robert Schoelkopf, has developed a method of creating qubits that can work at superior speed with a lower error rate.
To create one qubit that performs “logically” (i.e. free of errors and noise), a larger number of “physical” qubits are needed to correct and eliminate errors. Some companies still need 1,000 physical qubits to correct errors and eliminate the noise generated by one underlying logical qubit.
Baratz believes that with its latest acquistion D-Wave can get that ratio down to 25 to 100 physical qubits per logical qubit.
QC’s chips “can be error-corrected with a small number of physical qubits. They are revolutionary,” he said.
A $10 million all-you-can-eat buffet
The new tech from QC will supplement D-Wave’s core business, which is based around a quantum method called “annealing,” in which quantum computing is used to calculate the optimal solution from a many variables by detecting the solution indicated by the lowest energy state within the quantum mechanism. (Yes, it’s complicated.)
That service is starting to show signs of commercial pickup. D-Wave just signed a $10 million, two-year licensing deal with an unnamed Fortune 100 company in which the client will get an “all you can eat” buffet of D-Wave’s services.
The company also claims more than 100 revenue-paying customers, including Ford, BASF, Shionogi (Japan), and Pattison Food Group.
Importantly, less than 10% of D-Wave’s clients are government research contracts, Baratz said.
“That’s another thing that makes us different,” Baratz said. “If you look at the revenue for pretty much all the independent quantum computing companies it’s 90% government work, because what they’re doing is taking government grants to fund their R&D and calling it ‘revenue.’ That’s mostly what’s going on.”
