Here’s the lead-in to Luke Lango’s latest pitch for his Innovation Investor newsletter (being sold at $29/yr now, much less than the typical $49-99 “entry level” subscription generally has been in recent years, which tells me that publishers are a little desperate to refill the top of their “marketing funnel” these days)…

“The government is covertly testing what’s set to be the world’s first quadrillion-dollar technology inside of… ‘Area 52’

“For those seeking out-of-this world profits in 2023…

“‘Area 52’s’ technology will be bigger than Amazon, Tesla, and Netflix,'” predicts one of America’s top analysts.

“Here’s the hottest stock to own BEFORE March 27, 2023!”

That sounded very familiar, so I figured we had already covered this pitch… but no, it was a different pundit that was using this “Area 52” term to talk about the Chicago suburbs recently.

Though yes, like Lou Basenese’s Area 52 pitch last year, this one has nothing to do with aliens — this ad is a spiel about quantum computing, with “Area 52” being the test loop for quantum networking technology that was launched between Argonne National Laboratory and the University of Chicago in 2020 and has been extended since. Lango even pulls many of the same quotes as Basenese…

“Top scientists and major media outlets call it a ‘Holy Grail’ technology.

“Discover magazine calls it the ‘Garden of Eden.’

“The Department of Energy calls it ‘transformative to our entire way of life.’

“Harvard Business Review says it’ll help us ‘perform previously impossible tasks.’

“U.S. intelligence officials warn that ‘America’s status as a global superpower depends on it.'”

Here’s my general spiel about quantum computing, in case you missed any of my previous articles on the topic — I’m not an expert, but this is how I try to explain and understand the concept:

Quantum computing is essentially the exponentially faster “next level” of computing power that has been under development for decades but has gotten a lot more attention in the past five or six years. If you don’t know anything about the topic, my (very basic) understanding of quantum computing is that it’s an evolution of binary code — current chips and computers work on a binary system, meaning every single thing they do is based on transistors that process a series of signals that are either on or off, each one is either 1 or 0.

Quantum computing leverages the quantum world, where there’s more than one state of being for an electron — it can be charged or not charged, of course, but it can also be many different things at once. That opens up the possibilities for a much more powerful thinking machine, because instead of each unit of “thought” being a 1 or a 0, it can be any of dozens of things, with the storage or processing being based not on an on or off signal but on the combination of many different physical states of a subatomic particle. Basically, just think of it as a way for a computer to become exponentially more capable — instead of having the two sides of a coin, you’ve got the 12 sides of Dungeons and Dragons dice, creating dramatically more potential outcomes.

There are lots of different theoretical models for quantum computing, and I don’t really understand any of them. The hope is that they will be hugely helpful for major projects that would overwhelm a conventional computer, even a supercomputer, like simulation of complex systems, or cryptography. They would also have the potential to dramatically speed up artificial intelligence processing and “learning.” There’s a pretty readable Medium article here from a couple years ago that tries to explain the basics, if you’re interested, and there’s a widely recommended book called Q is for Quantum that effectively explains quantum mechanics without any upper-level math. There’s also a good New York Times article here, which focuses on Google’s development of the quantum Sycamore processor and their initial claim of “quantum supremacy” (this was back in 2019).

And if you want a little caution, here’s a quote from a Scientific American column published a little over a year ago (also a good read, “Will Quantum Computing Ever Live Up to Its Hype?“)….

“Lots of other technologies—genetic engineering, high-temperature superconductors, nanotechnology and fusion energy come to mind—have gone through phases of irrational exuberance. But something about quantum computing makes it especially prone to hype, [Scott] Aaronson suggests, perhaps because ‘”quantum” stands for something cool you shouldn’t be able to understand.'”

More recently, with the hype cycle leading to a few quantum computing companies going public, and a boom of startups getting funding over the past few years, there’s been talk in the industry about how to ease up on the hype cycle and avoid the boom-and-bust research funding that artificial intelligence suffered through in past decades — researchers worry about a “Quantum Winter,” something similar to what computer science R&D fell into with “AI Winter” at times over the years (that’s when progress on AI advancement was sometimes stalled for a few years because too much hype led to overpromising, wasting lots of money, and disappointing results, which cooled the research funding until some kind of breakthrough started the hype cycle up again).

Luke Lango is not so worried about that “Quantum Winter,” of course, he’s all about the buildup of the hype cycle. Here’s how he puts it:

“I could easily describe the technology inside of “Area 52” as…

• On par with the discoveries of fire, the wheel, the internet, and flight…
• Critical to America’s national security over the next 100 years…
• Vital to global economic growth over the same period…
• Worth 10X the existing internet…
• The first technology I’ve ever valued above a quadrillion dollars, and therefore…

“The single greatest investment you’ll ever make in your life.”

If you want a little counter to that, here’s an excerpt from a CNET article about Q2B, a quantum conference, back in December:

“… the reality is that quantum computing hype isn’t generally rampant. Over and over at Q2B, quantum computing advocates showed themselves to be measured in their predictions and guarded about promising imminent breakthroughs. Comments that quantum computing will be ‘bigger than fire’ are the exception, not the rule.

“Instead, advocates prefer to point to a reasonable track record of steady progress. Quantum computer makers have gradually increased the scale of quantum computers, improved its software and decreased the qubit-perturbing noise that derails calculations. The race to build a quantum computer is balanced against patience and technology road maps that stretch years into the future.

“For example, Google achieved its first error correction milestone in 2022, expects its next in 2025 or so, then has two more milestones on its road map before it plans to deliver a truly powerful quantum computer in 2029. Other roadmaps from companies like Quantinuum and IBM are equally detailed.

“And new quantum computing efforts keep cropping up. Cloud computing powerhouse Amazon, which started its Braket service with access to others’ quantum computers, is now at work on its own machines too. At Q2B, the Novo Nordisk Foundation — with funding from its Novo Nordisk pharmaceutical company — announced a plan to fund a quantum computer for biosciences at the University of Copenhagen’s Niels Bohr Institute in Denmark.

“It’s a long-term plan with an expectation that it’ll be able to solve life sciences problems in 2035, said physicist Peter Krogstrup Jeppesen, who left a quantum computing research position at Microsoft to lead the effort.”

OK, so… “bigger than fire,” maybe… but also, you might want to give it ten or twenty years.

Still, that doesn’t mean there won’t be exciting stock market stories well before quantum computers become practical or useful for actual work… so which of these stories is lighting up Luke Lango’s imagination? Let’s check out his clues…

“In the global race to ‘get ahead’ on ‘Area 52’s’ awesome technology….

“I believe the little company I’m tracking — a company whose shares could make you rich in 2023 — is already ahead… way ahead!

“In fact, I project its sales could rocket from around $25 million in 2022…

“To upward of $2 billion in the months ahead.

“Wouldn’t you jump at the chance to invest alongside a sales increase of 7,900%?

“On the low side, shares could quickly triple in price…

“On the high side, you could pocket up to 79X your investment.”

That sounds remarkable, no?

Care to guess what the key phrase in there is?

You got it, it’s “in the months ahead.”

Why? Because it gives you the impression of being imminent and just around the corner, but actually has no real meaning. If Luke Lango meant that he was sure that this company would grow its sales 7,900% this year, he would have said this year. Instead, he said “in the months ahead”… which essentially means, “maybe someday.”

To be fair, he does say this is a high-risk speculation — in his words…

“To truly participate in ‘Area 52’s’ financial upside, you need to be a shark…

“Ask any shark investor — even the celebrity “sharks” on the hit TV show Shark Tank — and they’ll tell you that 1) every investing opportunity comes with risks, and 2) never invest more than you can afford to lose.

“Some companies will thrive…

“Other companies will (and do) go bust.

“Therefore, a shark only hunts for the highest-quality stocks at low prices, which typically means investing alongside some of the biggest sharks in the ocean — i.e., insiders, venture capitalists, and angel investors.”

OK… but just remember, venture capitalists and angel investors go ga-ga over dumb things, too, and get swept up in the hype cycle just like everyone else. That’s why all the little quantum computing startups seem to be merging with each other these days… it’s not because someone’s building a titan, it’s because they’re trying to survive as venture capital funding inevitably dries up for a while following the crash of the first three quantum computing “pure play” stocks to go public. Big investors get sucked into stories, too, and have just as much “Fear Of Missing Out (FOMO)” as the stock cheerleaders on Reddit. Maybe more, because VC funds are terrified of missing out on the next big story and having to justify that to their investors.

And Lango does specifically push hard on the “this year” nonsense…

“Keep your unwavering attention on the year 2023…

“Because ‘Area 52’s’ technology will begin reshaping the global economy in 2023…

“Because the potential for massive returns exists in 2023 (not far-off, distant returns)…

“Because certain stocks could ascend to dizzying heights in 2023…”

So what’s he pitching? Something to do with the nascent hardware of quantum computing…

“… for out-of-this-world profit potential in 2023…

“I’m urging everyone to go straight to the source of the Quantum Internet’s miraculous power…

“Are 52’s Power Source: Quantum Microchips…

“Think of quantum microchips as teeny tiny engines that five e-devices their computing power, like Intel’s famous Pentium chip, which powered an entire generation of PCs…”

He does show images of some specific hardware, like Google’s “Sycamore” quantum computing chip, though that’s still mostly a bespoke R&D project.

What’s the stock, then? One assumes it’s not one of the three quantum stocks that came public through SPAC mergers during that recent mania (that’s Rigetti (RGTI), D-Wave Quantum (QBTS) and IonQ (IONQ) — the best performer in that bunch, IONQ, is down by only 80% or so from its highs, the others are down well over 90%), because he says this:

“Not in a million years will the media cover the little company I’ve listed as a ‘Screaming Buy’ whose product could hold the key to quantum technology’s commercial rollout.”

So what is this emerging chipmaker? We finally get into some more specific clues from Lango…

“As it stands, only a small handful of companies have developed fully operational quantum microchips — mostly major players like Google, IBM, and Intel.

“But one tiny company is bucking the approach of the ‘big dogs’ in this space to create the premier quantum microchip.

“You see, the quantum microchips these tech giants are developing require large chambers with intensely cold temperatures – near absolute zero – to work properly.

“But one tiny company is developing quantum microchips with an approach tailored specifically to quantum mechanics…

“And this approach enables the creation of super-small quantum computers that can operate with fewer errors at room temperature.

“With its proprietary quantum science, guarded by more than 160 patents and applications….”

Other hints?

“… trading on the Nasdaq for only 0.08% the size of Amazon….

“… groundbreaking $13 million contract with the U.S. Air Force Research Lab in 2022”

And that’s where our “$2 billion” in potential revenue apparently comes from, some next-level government funding:

“… with quantum computing set to go mainstream by 2025…

“These same government agencies will soon need to start running solutions on their own quantum computers….

“… a contract a mere 1/5th the size of Amazon’s NSA deal would blast this little company’s sales from around $25 million in 2022…

“To over $2 billion in the days ahead, representing a staggering increase of 7,900%.”

And he thinks “it could start” with the company’s earnings announcement, which he says will be on March 27, 2023.

So, what’s Luke Lango’s “Quantum Windfall” stock? Thinkolator sez that Lango here is actually again pitching IonQ (IONQ), so I guess I was wrong about the “it’s not one of the three quantum SPACs” guess.

IonQ will be reporting on March 30, not the 27th, though I guess that’s close enough — and this week they’re trying to get investors excited about the numbers with this pre-announcement:

IonQ Poised for Aggressive Commercial Growth in 2023 Sets Date to Report on Momentum and Fourth Quarter 2022 Financial Results.

So yes, IonQ says that they did achieve $25 million in bookings in 2022, which was 50% growth for them, though that’s not quite the same as $25 million in sales, of course (bookings can go well out into the future — the current analyst guess is that 2022 sales will end up being $10.5 million). And yes, they did get a $13 million contract from an Air Force lab last Fall.

And though revenue remains very low, and they’re really mostly still a R&D company, they are quite active — they’re building the first phase of what they hope will be a manufacturing facility in Washington, and they bought a small crowd-funded Canadian quantum computing company in January to add some software tools and people to their team.

IonQ is working on trapped ion systems, which is essentially what those “chips” are that Lango talks about in his ad — you can see their explanation of the technology here, which is interesting and certainly worth a gander… but I have absolutely no idea whether or not this will end up being an important core of quantum computing in three or four years, when there’s some potential for real commercial applications to emerge (that’s just going by the consensus of stuff I’ve read, I am not at all an expert in judging when quantum computing might emerge as genuinely useful). The two main strategies for developing quantum computers seem to be superconductors and these trapped ion systems, and the other “pure play” quantum computing stocks (as well as folks like Alphabet) seem to have mostly focused on superconducting/supercooled quantum systems, so I guess IonQ has that “pure play on trapped ions” edge going for it, which might help it to stand out as an investment the next time the quantum “story” heats up again.

Will that be this year? I don’t know. Luke Lango seems to think so, but it’s hard to predict when a technology story will catch fire, or be doused. They have lots of partnerships, their initial quantum systems are available on the major cloud platforms (and several of those cloud platforms have also invested in IonQ over the years, including both Amazon and Google), and they seem to me to be the most “grown up” quantum computing stock… but that’s not saying much, because the only other two, Rigetti (RGTI) and D-Wave (QBTS), have both been completely abandoned by investors. QBTS was a late SPAC merger, after the mania had crested, so the SPAC shareholders took their money and went home and the company didn’t end up with nearly enough cash to keep the work going in the way they had planned… RGTI has changed leadership and has been slashing staff, they now trade at a value that’s less than their net cash on the books, a sign that investors think they’ve missed their chance… and that leaves IONQ as the standard-bearer, such as they are, largely because they’ve still got plenty of cash and some strong backers.

Here’s how I think about this one: They’re still not in a position where you can analyze an investment as making sense in any financial way, this is entirely a speculation on a product suite and development roadmap that are largely unproven, and within an area of research and development where we aren’t even at all sure what kind of quantum computing technology might work best or be most practical, or how long the process of commercializing quantum computing might take. That means it’s either a story speculation, a bet that you can make about how excited investors might get in the next year or two about quantum headlines or partnership announcements, or it’s a very long-term bet on IonQ being a leader in the industry in five or ten years, when perhaps we’ll have a clearer path to commercial quantum computing. You’re welcome to place your bets, of course, but I don’t think I understand any of this well enough to believe that I’m going to make a smart trade in this area — particularly when giants like IBM and Alphabet and Microsoft and labs around the world have also been spending hundreds of millions of dollars developing quantum computing projects.

In my view, the best thing IonQ has going for them, because of some name-brand partners and some initial levels of revenue and commercial work, and perhaps because their trapped ion technology stands out as being less expensive at this early stage and resonating as a good story, is that they’re really the only “pure play” quantum computing stock that hasn’t been completely written off as junk by investors. That means, if things pick up again in the quantum hype cycle, that they’ve got a good shot at being the first stock to get attention and buying pressure. It’s a thin thread to bet on, in my opinion, but that’s probably the opportunity for IONQ shares to get a little life if you’re interested in the near future — being the only horse that has four legs at a time when people want to bet on a race might mean that it doesn’t matter that much, in the short term, how fast the horse is. You just have to guess correctly about when investors are going to want to bet on quantum stories again.

That’s just my thinking, though, and I’m sure we’ve got some quantum enthusiasts out there in Gumshoedom that can pipe up and tell me the many ways in which I’m wrong… please don’t hold back, just use our friendly little comment box below, quantum computing is a mystery to me and I’d be delighted to learn more. See a winner among those first three quantum computing stocks to test the market in recent years? Think it will be one of the giants like Google or Microsoft that actually takes the lead? Maybe some other quantum hopeful that hasn’t even gone public yet? Do let us know… and thanks, as always, for reading.

Disclosure: Of the companies mentioned above, I owns shares of Alphabet and Amazon. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.