Quantum Computing Inc $QUBT fraud

My background: I'm a graduate student and researcher in quantum complexity theory. I'm not a hardware engineer, but I do follow developments in quantum hardware closely. Based on my analysis, I have serious concerns that QUBT’s claims may amount to fraud.

Positions. I fully believe that the stock of this beverage-company-turned-quantum-computing should go to $0 (or close to it) and it is only a matter of time before it does.

I will split this post into a few parts. First, we will review their fundamentals. Then, we will look into their future claims. Finally, we will review any contracts and future prospects.

1) Fundamentals. The market cap of QUBT is $3.73 billion and for the three-month period ending June 30, 2025, QUBT reported revenues of $61,000 (yes, you read that right), a decrease from the $183,000 generated in the same quarter of the previous year. They do not have a P/E ratio, as they are unprofitable (you could think that their P/E ratio is high and negative). This means that they have an enterprise value of roughly $3.38 billion which comes almost entirely from their market cap and with a revenue of $263k, their EV/revenue ratio is 12.870. To put it into perspective how extreme that is:

If you think RDDT is inflated, then QUBT is roughly 643 more inflated.
Equivalently, RDDT's price would be $137,602 with QUBT's ratio.
This isn't just a premium or hopeium, this is complete detachment from any financial logic or reality.

The company's operational model is a financial black hole. While generating almost no income, its operating expenses nearly doubled year-over-year to $10.2 million for the quarter, resulting in a $10.2 million operating loss. That means the company spent over $167 for every single dollar it made in revenue. The bottom line was a net loss of $36.5 million for the quarter.

QUBT's narrative is that it's a pioneer in one of the most capital-intensive R&D races in human history. Yet, its R&D investment totaled $6.0 million. To compare, Google and IBM are forming partnerships to pour $150 million into university research alone, with their internal budgets estimated to be in the billions. How can QUBT possibly compete, let alone innovate, when its R&D budget is a rounding error for its serious competitors?

2) Their future plan. This is straight from their presentation. For 2025, they claim "Early revenues primarily from early adopters." This is their present reality: microscopic revenues. For 2026-2027, they project "High-margin revenue from first mover advantage" and "Strong pipeline conversion." These are classic, undefined marketing terms. What constitutes "high-margin"? 20%? 80%? How much revenue? A million dollars? A hundred million? The lack of any figures makes these claims meaningless. There is no way to measure their performance or hold them accountable. They have no viable plan to get an advantage.
In 2028, the goal is "Sales Growth => Market Growth." This is a generic corporate objective, not a financial forecast. It's a promise to perform well in an undefined future market.

They sell something they call the DIRAC-3, which is an analog quantum annealer. It is not a universal quantum computer capable of running a wide range of algorithms. Its sole function is to find approximate solutions in a a narrow category of optimization problems. In practice, its actual use is almost certainly confined to experimental and research settings. The buyers are not businesses looking to solve their core operational issues, but rather academic institutions or corporate R&D labs that are exploring novel computing architectures. For these niche customers, the DIRAC-3 serves as a piece of laboratory equipment to test theories, publish papers, and perhaps make small claims in quantum-adjacent research. The almost non-existent revenue confirms that it is not being deployed for any meaningful commercial or production-level task.

The primary reason a research group might acquire a DIRAC-3 has little to do with solving a pressing business problem better than a classical computer. Its appeal lies in its novelty and convenience. The machine's use of "qudits" and its analog architecture makes it a fun object of academic study at the very best. In essence, someone would want the DIRAC-3 not because it provides a superior solution, but because it is a comparatively cheap tool for exploration and playing around, not a tool for production.

The future prospects for the DIRAC-3 appear exceptionally bleak. It is trapped in a brutally competitive field and it has failed to demonstrate a decisive advantage. To be commercially viable, it must solve a specific, high-value optimization problem significantly faster or cheaper than the highly-refined classical software that has been developed over decades. There is zero evidence that it can do this, and it will never be able to do so. Its potential market is being squeezed from both sides: classical optimization algorithms continue to improve, while the slow but steady progress of true universal quantum computers (i.e. by Google and IBM) threaten to make such intermediate devices obsolete. The DIRAC-3's most probable fate is to become a technological footnote. It is an interesting but ultimately unsuccessful architectural experiment that never found a problem it could solve well enough to justify its own existence in the commercial world.

They make some claims of what they "will develop":

First is the Photonic Intelligent Unit (PIU), or "Reservoir Computer," which is being marketed as a revolutionary device for "compute at the edge" and Artificial Intelligence. This is straight up misleading and the reality is that reservoir computing is a highly obscure, academic niche even amongst researchers. It has zero commercial adoption. The AI market is not asking for this and it never will, not even in 20 years. AI is built around GPUs and specialized AI chips from NVIDIA, Google, and Apple. The notion that QUBT's niche device, based on a fringe computing model, could make even the smallest dent in this market is laughable. It is a solution in search of a problem, a research gadget being passed off as a commercial AI accelerator. Its only potential customers are a handful of academics, not the enterprises driving the AI revolution. I fully believe they only included the word "AI" as a buzzword to attract and scam more investors into their sham of a company.

Next is the Quantum Cyber Module (QCM), which promises "unconditional security at chip scale" and is supposedly destined for "cell phones." This is pure fantasy. At its core, this device is likely just a Quantum Random Number Generator (QRNG), a piece of hardware that has been around for years. While useful for specific cryptographic applications, the market is small, and established competitors like ID Quantique have dominated it for over a decade. The claim of putting this technology into a cell phone is absurd. The cost, size, and marginal benefit over existing cryptographic algorithms make it a non-starter for any mass-market device. It is a commodity component being dressed up in a superhero costume of "unconditional security" to attract investors who are fearful of cyber threats but ignorant of the actual technology.

Finally, the company claims to have a "Quantum Intelligent Sensing Module" (QISM) focused on LiDAR applications, boasting "unparalleled detection accuracy." This is, perhaps, the most ridiculous claim of all (and they have made a lot of crazy claims!). Consider heavily-funded companies like Luminar and Velodyne fighting for razor-thin margins and massive automotive and defense contracts. These companies have invested billions in manufacturing scale, supply chains, and industry partnerships. QUBT has none of this. Their supposed technological edge (single-photon detection) is a known technique with its own significant drawbacks, not a magic bullet. They are entering a market with a lab prototype and a marketing slogan. Their sensing platform has no viable path to commercialization and stands zero chance against the alternatives.

In conclusion, these other "gadgets" are not serious products. Each one is a lab-level prototype, carefully branded with the buzzwords of a hot industry (AI, cybersecurity, autonomous vehicles) to create the illusion of a diversified, high-tech portfolio. In reality, none of these products have a credible path to generating meaningful revenue or competing in their respective markets.

3) Lawsuits and future contracts. QUBT is now facing multiple securities class-action lawsuits that accuse the company and its leadership of securities fraud. The allegation is that QUBT deliberately misled investors through a series of false statements and material omissions designed to artificially inflate its stock price.

A central point in the lawsuits is the systematic misrepresentation of its relationship with NASA. The company presented itself as a key strategic partner, implying its technology was integral to the space agency's operations. The lawsuits allege this was a calculated falsehood. In reality, the company had only received a few minor Small Business Innovation Research (SBIR) grants. These are common, low-value awards and do not represent a major strategic partnership. The plaintiffs argue that QCi improperly used the NASA brand to create a false impression of credibility and technological validation. In fact, you would be surprised how easy a company can get one of these contracts. The NASA Phase I grants QCi received were for approximately $125,000 to $150,000 each. It's the financial equivalent of a student receiving a $1,000 university grant to work on a science fair project, and then telling investors they have a major strategic partnership with the university to revolutionize the field.

The legal complaints further allege that the company created a false narrative of commercial readiness. While executives claimed to have market-ready products like the DIRAC-3 and a significant sales pipeline, the company's public financial filings reported negligible revenue. This data is presented as direct evidence that the commercial operations described to investors were a fiction. The lawsuits contend that the company was not a viable business but was merely pretending to be one to support its inflated market valuation.

Finally, the lawsuits claim that QCi made unsupported statements about its technological superiority, including achieving "quantum advantage," without providing the necessary scientific proof. The plaintiffs argue that these were not good-faith claims but were technical jargon used to intentionally mislead investors who could not independently verify their accuracy. These legal actions now pose a direct threat to the company's operational stability, demanding millions in legal fees, consuming management's focus, and causing irreversible damage to its reputation.

4) My personal note. The field of quantum computing and its adjacent disciplines is still in its embryonic stage. It is a very active research field with a lot of math to discover, but hardware progress is extremely slow and there are no signs that it will speed up any time soon.
Any prospect of a profitable, commercial quantum computing business remains decades away. A conservative estimate would place the timeline for consistent profitability at 20 years or more, and even then, it will only be achieved by the organization that makes fundamental breakthroughs in research. That level of discovery will not come from an underfunded startup with a negligible R&D budget; it will almost certainly emerge from major research universities and/or Google and IBM. They possess scientific talent required to solve the hardest problems in science, QUBT does not.

Given this context, the valuations attached to companies like Quantum Computing Inc. are fundamentally absurd. They are not based in any recognizable financial or scientific reality. The claims made by the company's leadership are not merely optimistic; they are so far removed from the current state of the art that no credible expert in the field would support them. This disconnect is so severe that it transcends poor business strategy and enters the realm of potential securities fraud. When a company's public statements and valuation are in such stark opposition to the consensus of the scientific community, it raises serious questions that demand investigation by the appropriate financial authorities to determine if investors were willfully deceived.