Wall Street Lunch: Nvidia Hamstrings Quantum Computing Stocks

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NVDA CEO Huang estimates 20 years before very useful quantum computers. (0:16) AMC CEO feels shareholder pain. (2:41) Sportsbooks hit as too many NFL favorites win. (3:51)

This is an abridged transcript of the podcast.

Our top story so far. Quantum computing stocks are sinking after Nvidia’s (NASDAQ:NVDA) CEO Jensen Huang said that “very useful” quantum computers are over a decade away.

Rigetti Computing (RGTI), Arqit Quantum (ARQQ), D-Wave Quantum (QBTS), IonQ (IONQ), and Quantum Computing (QUBT) are off about a third.

Huang said at a CES Q&A: “If you kind of said 15 years for very useful quantum computers, that would probably be on the early side. If you said 30, it’s probably on the late side. If you picked 20, I think a whole bunch of us would believe it.”

In the past year, Quantum Computing has surged over 1,880%, Rigetti over 1,500%, and D-Wave Quantum has gained nearly 985%. IonQ has soared about 290% while Arqit has jumped nearly 230%.

In today’s trading, most of the action is back and forth in the bond market. The 4.7% level is looking like a battleground for the 10-year Treasury yield (US10Y) after it touched a 52-week high of 4.75% and saw strong resistance. The yield is up nearly 100 basis points since September, a historically anomalous move during a Fed rate-cutting cycle.

Mohamed El-Erian, chief economic advisor at Allianz, says the 10-year “could well spend quite a bit of 2025 in the 4.75-5% range in a year marked by volatility, the need for more barbelled investment portfolios, and bottom-up name-driven (rather than market- or theme-driven) investing.”

On the economic front, there were more mixed signals on the labor market ahead of Friday’s payrolls report.

Weekly initial jobless claims, out a day early due to markets being closed Thursday, dropped unexpectedly to 201,000 vs. the 214,000 consensus.

Economist Ernie Tedeschi notes that claims have started out 2025 “lower than the first week of 2018, 2019, 2023, or 2024, both in headcount terms and relative to employment.”

In addition, ADP said its measure of December private sector payrolls rose 122,000, less than the 134,000 consensus and slowing from the 146,000.

Pantheon Macro noted: “Almost 80% of the increase in employment was driven by firms employing 500 or more people, adding to evidence that small businesses are under the most financial pressure.”

“That said, the recent track record of ADP’s data has been very poor. Since ADP overhauled its methodology in August 2022, the average absolute error of its estimate of initial private payrolls has been 88K, with a massive range, from -337K to +348K.”

Among active stocks, AMC Entertainment (AMC) CEO Adam Aron feels your pain. He updated on social media that he holds 722,820 shares of the company. He said that he believes that he remains AMC’s largest retail investor. Looking ahead, Aron plans to vest in 1.2 million more AMC shares within 26 months, with many of those before March 2025.

“So, I certainly feel and share in your pain as AMC’s share price has fallen in 2023 and 2024. I understand that it hurts,” he said.

HSBC downgraded AMD (AMD) to Reduce from Buy, lowering its price target to $110 from $200. Analyst Frank Lee said, “Its AI GPU roadmap is less competitive than we previously thought.”

And Helen of Troy (HELE) reported a larger-than-expected decline in third-quarter revenue and lowered its top-line guidance for fiscal year 2025.

Weighed down by the “weak illness season globally,” soft consumer demand for hair care products, and an overall challenging economic environment that negatively impacted its Beauty and Wellness division, the company’s revenue was down 3.4% to $530.7 million, missing expectations by over $2 million.

In other news of note, we move to the one business where you never want to hear that the customer is always right.

FanDuel owner Flutter Entertainment (FLUT) says the 2024-2025 NFL season to date has been the most customer-friendly since the launch of online sports betting, with the highest rate of favorites winning in nearly 20 years.

That translates to $438 million in gross gaming headwinds related to unfavorable NFL outcomes since Flutter reported earnings on November 12. It took an unexpected $205 million hit to EBITDA, due in part to its NFL hold.

Bank of America warned that DraftKings (DKNG) is likely to have seen the same unfavorable NFL outcomes. Analyst Shaun Kelley sees a $60 million to $80 million EBITDA headwind for DKNG in Q4, which they said is material. But it’s possibly less than some investor expectations and less than FanDuel on a proportionate basis.

Kelley says: “Several mitigating factors for DKNG include 1) DKNG’s sponsorship of the Tyson-Paul fight with strong volumes/hold in Nov., 2) a +4891 pre-made parlay hitting on FanDuel in Dec. with over 17k bets placed, and 3) unfavorable outcomes during FanDuel’s sponsorship of NFL Christmas Day games on Netflix.”

And in the Wall Street Research Corner, Wolfe Research eyes software (XSW) (IGPT) as a key area of M&A opportunities in 2025.

Chief Investment Strategist Chris Senyek says this is due to “animal spirits” remaining strong, capital markets reawakening, and a potentially friendlier FTC/DOJ environment.

Among the names are F5 (FFIV), Paycom (PAYC), Tenable (TENB), Unity Software (U), Box (BOX), SolarWinds (SWI), and JFrog (FROG).

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.