Talk about a computer crash.

Quantum computing stocks tumbled today after Nvidia CEO and AI-whisperer Jensen Huang warned that functional quantum computers are still decades away.

Rigetti Computing dropped 45.41% while Quantum Computing Inc. sank 43.34%, and IonQ fell 39%—just weeks after all three stocks had soared on market hype.

Investors have bet heavily on the novel, futuristic technology, which scientists say will leverage powerful quantum mechanics to create super-powerful computers. The excitement was enough that shares of both Rigetti Computing and Quantum Computing rose a staggering 2,000% over the past three months alone. But with many leading quantum firms having little to show so far for their efforts, investors’ speculative bets ended up creating more of a bubble than a perceptive gamble.

Getting realistic

Multi-digit drops over one person’s comments might seem a little dramatic, but quantum stocks have been riding more on hype than solid fundamentals for a while. For example, IonQ is projected to deliver $41.6 million in annual revenue for 2024—pretty good, but still tiny compared to other firms like it with a market cap of roughly $10 billion.

That said, while quantum supercomputers might sound more like something from a Marvel movie than a real investment prospect, this tech will pack a punch—even if that punch is decades away. For example, Google said last year that Willow, a new quantum computing chip, could take five minutes to do a computation that would otherwise take today’s supercomputers 10 septillion years—or 10,000,000,000,000,000,000,000,000 years, to be exact.

The bottom line: Our favorite leather jacket-clad CEO continues to flex Nvidia’s AI muscle, proving just how much his influence has come to dominate the tech landscape. His offhand musings are taken as gospel by investors.

Maybe in his next Q&A he can tell everyone to subscribe to this newsletter.—LB

🟢 What’s up

• eBay popped 9.86% on the news that Meta Platforms will allow some of the bidding site’s listings to appear on Facebook Marketplace.
• Good news for sports bettors: FanDuel parent company Flutter Entertainment lowered its revenue outlook due to so many NFL favorites winning their games this year. Shares sank to start the day but recovered 1.65%.
• Arcadium Lithium climbed 8.16% thanks to approval by the Committee on Foreign Investment in the United States for its acquisition by Rio Tinto.
• More deals: Boston Scientific rose 4.26% on the news that it’s acquiring rival medical device maker Bolt Medical.
• More more deals: Virtual health platform Accolade skyrocketed 104.78% after Trancarent announced it’s acquiring the company for $621 million.

What’s down

• AMD tumbled 4.31% after HSBC analysts downgraded the stock, citing concerns that it will be unable to keep up with fellow semiconductor stock Nvidia.
• Edison International fell 10.18% as thousands of Los Angeles residents—and therefore company customers—flee encroaching wildfires.
• What goes up, must come down: Getty Images popped yesterday but dropped 17.55% today as investors took profits following the news that it will acquire Shutterstock.

Oaktree Capital Management co-founder Howard Marks is famous for calling the top of the dot-com bubble 25 years ago. So when someone as prescient as he says he’s keeping a close eye on the markets for warning signs of a bubble, it’s worth paying attention.

In a memo yesterday, Marks pointed out that, while the market’s valuations are certainly high, it’s really investor psychology that worries him. When people believe that the good times will never end, they're willing to pay high prices for the best-performing stocks—but when the ride does eventually come to a stop, the downturn can be sudden and painful.

“There’s usually a grain of truth that underlies every mania and bubble. It just gets taken too far,” Marks wrote. He later continued: “When something is on the pedestal of popularity, the risk of a decline is high. When people assume – and price in – an expectation that things can only get better, the damage done by negative surprises is profound.”

That insight is particularly on the nose at the moment, given what happened to quantum computing stocks today (see the story above), and it’s a message that investors should keep in mind as they plan their portfolio moves for the new year.

Healthcare companies are just the latest to follow an emerging popular corporate playbook—when you hit a rut, turn to AI.

Pharma giant Novo Nordisk announced today that it’s doubling down on its partnership with private firm Valo Health, which uses artificial intelligence to help develop new weight loss drugs for diabetes, heart disease, and obesity. The deal comes amid a rough patch for the Dutch pharmaceutical company, whose market cap surpassed Denmark’s GDP last year on the back of its flagship GLP-1 weight loss drug Ozempic.

But the stock shed the wrong kind of weight and dropped about 21% in late December after its most advanced weight loss drug, CagriSema, showed only 20.4% weight loss in a clinical trial—lower than what Wall Street analysts previously projected. Shares of Novo Nordisk rose 2.76% today.

Bank of America and Deutsche Bank analysts still have faith in the pharma giant, and say now is time to buy before Novo Nordisk inflates again.

AI + Healthcare = ?

Novo Nordisk isn’t the only healthcare firm hoping to leverage machine learning to get some medical—and financial—results.

Advanced Micro Devices just announced a partnership with Absci Corp, a startup that uses AI for drug discovery. Nvidia is also jumping on the drug discovery bandwagon, partnering with Amgen and Recursion Pharmaceuticals. deCODE Genetics, a subsidiary of Amgen, is creating an Nvidia-powered supercomputer to work on genomic sequencing.

Zooming out: There's a good reason all of these AI giants are dabbling in healthcare. Pharmaceutical drug discovery is a time-consuming and laborious process that still results in the failure of 90% of the candidates that reach the clinical trial stage. That’s why doctors and pharma executives think the process is ripe for a machine learning transformation.

Now, tech companies are just hoping it can give their stocks a makeover, too.—LB

• Private employers added 122,000 jobs in December, below economist estimates and down from November’s 146,000.
• Some good news: Jobless claims, or the number of Americans filing for unemployment insurance, fell to 201,000—an 11-month low.
• Some bad news: 41% of employers intend to lay off employees in the coming years thanks to AI automation.
• Big union news: Park City Mountain and its ski patrol union have reached a tentative agreement, while dockworkers are a week away from another strike.
• Fed Governor Christopher Waller thinks there will be more rate cuts next year than Wall Street expects, no matter what happens with tariffs.
• 48% of credit cardholders carry debt over every month.

Remember, tomorrow’s a national day of mourning for President Jimmy Carter, which means the stock market is closed all day, while the bond market closes at 2 pm. But don’t worry—Brew Markets will still hit your inboxes at our usual time.