Quantum stocks surge despite Trump official denying talks of equity stakes
After a furious rally for most of the year, quantum computing stocks have been slumping over the past several trading sessions.
That was until Thursday when The Wall Street Journal reported that several quantum companies are in talks with the Trump administration about the US Commerce Department taking a stake in the company in exchange for federal funding.
According to the Journal, the companies that are negotiating with the administration include Rigetti Computing (RGTI), D-Wave Quantum (QBTS) and IonQ (IONQ).
Quantum Computing (QUBT) is reportedly also weighing a deal with the government.
The companies are discussing the possibility of the government taking a stake in exchange for a minimum funding award of $10 million.
The news sent all the stocks soaring on Thursday. D-Wave rose 13.8%, Rigetti was up 9.8%, Quantum Computing added 7.2% and IonQ gained 7.1%.
The rally showed no signs of weakening throughout the day, even after a spokesperson for the Commerce Department denied that there were ongoing talks happening.
“The Commerce Department is not currently negotiating equity stakes with quantum computing companies,” a spokesperson for the agency said in a statement to CNBC.
CNBC suggested that the department could essentially be making a non-denial denial, where “currently” means the talks are not happening yet but will be happening at some point, and “equity” means that the deal could be done under a different arrangement.
Government won’t slow its dealmaking
One of the reasons that investors might’ve shrugged off the Commerce Department's insistence that the negotiations weren’t happening is that a spokesperson for Rigetti released a statement to CNBC that seemed to imply they were.
“We are continuously engaging with the U.S. government on funding opportunities,” the company said. “If the U.S. does not lead in supporting these breakthroughs, others will, posing significant risks to our national security.”
In fact, all three companies appeared to confirm that the talks were taking place.
A spokesperson for Quantum told the Journal that “the government’s potential equity stakes in companies in the industry are exciting.”
Meanwhile, a spokesperson for D-Wave said that “the company wants to sell systems that can solve the government’s hard problems and get a return on investment.”
The Trump administration has been blurring the lines between free market capitalism with what Republicans like Sen. Rand Paul call “a step toward socialism.”
The government has already taken a 10% stake in Intel (INTC) and made a $400 million investment in MP Materials, which turned the Defense Department into the company’s largest shareholder.
What’s at the root of each investment is the White House’s view that it is protecting what it considers to be critical sectors in its ongoing trade war with China, from semiconductors to rare earth materials, and now quantum computing.
It’s expected that the Trump administration will continue negotiating deals to take equity stakes in other companies.
US Commerce Secretary Howard Lutnick has been critical of the Biden administration’s decision to give Intel $8 billion in grants in support of its $100 billion investments in semiconductor projects in the US.
“Why are we giving a company worth $100 billion this kind of money? What is in it for the American taxpayer?” he said in an appearance on CNBC. “And the answer Donald Trump has is we should get an equity stake for our money.”