Quantum computing could be a $198 billion industry in the next 15 years, Jefferies analyst says

Jefferies launched coverage of the quantum-computing sector, rating D-Wave Quantum and IonQ as buys and Rigetti Computing as a hold, and estimates the nascent industry currently generates about $1 billion of revenue with a potential total addressable market as high as $198 billion by 2040 (McKinsey), though other estimates range from $17.4 billion to $170 billion. The firms remain loss-making: D-Wave reported Q3 revenue of $3.7 million (+100%) and a $140 million net loss; IonQ posted $39.9 million (+222%) and a $1.1 billion loss; Rigetti saw Q3 revenue fall 18% to $1.9 million with a $201 million loss but disclosed $11.5 million of new contracts. Jefferies highlights an emerging supply chain for specialized components (dilution refrigerators, lasers/optics, control electronics) backed by governments and Big Tech, underlining sizeable upside if technical breakthroughs scale but significant execution and financing risk given the current lack of commercialized offerings.

Analysis

Jefferies initiated coverage of the quantum-computing sector and pegged current industry revenues at roughly $1 billion while citing widely divergent total-addressable-market estimates — McKinsey up to $198 billion by 2040, BCG up to $170 billion by 2040, and Yole at $17.4 billion by 2035 — highlighting large upside paired with deep uncertainty. The firm rated D-Wave Quantum and IonQ as buys and Rigetti Computing as a hold, signaling differentiated conviction across the small public peer set.

Company fundamentals remain early-stage and cash-intensive: D-Wave reported Q3 revenue of $3.7 million (+100%) and a $140 million net loss, IonQ posted $39.9 million (+222%) and a $1.1 billion net loss, and Rigetti saw Q3 revenue decline 18% to $1.9 million with a $201 million loss but disclosed $11.5 million of new contracts. Jefferies highlights an emerging specialized components supply chain (dilution refrigerators, lasers/optics, control electronics) supported by governments and Big Tech (Google, IBM), which could create nearer-term supplier opportunities even if full-scale quantum advantage is distant.

The note underscores that commercial delivery remains limited: theoretical performance gains are enormous but technical, engineering and financing risks are material, reflected in a mixed market sentiment (0.05) and modest market-impact score (0.33). Investors should therefore weigh strong top-line growth in select names against persistent losses, cash burn and the wide range of TAM scenarios when setting position size and monitoring catalysts such as pilot-to-production deployments and large enterprise or government contracts.

Key Decisions for Investors

• Consider selective, sized exposure to D-Wave and IonQ given Jefferies' buy ratings and outsized Q3 revenue growth, but size positions conservatively to account for large net losses and execution risk
• Treat Rigetti as a wait-and-see or smaller tactical exposure given revenue decline, negative sentiment and the hold rating, while monitoring realization of the $11.5 million in disclosed contracts
• Allocate a portion of thematic exposure to specialized component suppliers (cryogenics, lasers/optics, control electronics) that benefit from government and Big Tech funding, as these may monetize earlier than full-stack quantum systems
• Monitor near-term catalysts closely — commercial pilot deployments, sustained revenue growth, reductions in net losses, and clear cash runway or successful fundraises — and use those milestones to scale positions
• Maintain downside protection through limited position sizes or hedges given speculative fundamentals and the broad range of TAM estimates