If you think quantum computing sounds like science fiction, Wall Street analysts would like a word. The sector is generating about $1 billion in revenue right now, but Jefferies just put out a report saying that number could explode to $198 billion by 2040. That's not a typo.

Following the Money Into Quantum

Jefferies analysts led by Kevin Garrigan recently initiated coverage on the quantum computing space, mapping out what they call a total addressable market reaching $198 billion within the next 16 years, according to Fortune. The firm is making some early bets on who the winners might be.

They slapped Buy ratings on D-Wave Quantum (QBTS) and IonQ (IONQ), while taking a more cautious stance on Rigetti Computing (RGTI) with a Hold rating. What's interesting here is the backing these companies are getting. Jefferies points out that governments and tech heavyweights like Alphabet Inc. (GOOGL) and IBM (IBM) are pouring resources into quantum development, which tends to be a good sign if you're trying to figure out which emerging technologies have staying power.

The New AI?

Jefferies isn't alone in seeing massive potential here. Mizuho Securities jumped into coverage on the same companies just before this report dropped, predicting the market could hit $205 billion by 2035. They're comparing the quantum moment to the early days of GPUs, which is a pretty loaded comparison if you've been paying attention to what happened with AI chips.

Speaking of AI, Alphabet (GOOG) CEO Sundar Pichai recently said quantum computing today is roughly where artificial intelligence was five years ago. Let that sink in for a moment. Five years ago, most people thought AI was interesting but niche. Now it's reshaping entire industries and driving trillion-dollar valuations.

Some Companies Are Already Delivering

The bullish analyst calls aren't happening in a vacuum. D-Wave Quantum just reported third-quarter results that showed 100% revenue growth, hitting $3.8 million. Their GAAP gross profit jumped 156% to $2.7 million with a gross margin of 71.4%, and bookings climbed 80% quarter-over-quarter to $2.4 million.

IonQ put up even more impressive numbers. The company reported fourth-quarter revenue of $39.9 million, crushing the $27 million analyst estimate by 47.8%. They also raised their full-year 2025 revenue guidance to a range of $106 million to $110 million, well above both their previous forecast of $82 million to $100 million and the Street's consensus of $91.3 million.

Price Action: Investors are clearly paying attention. Year-to-date, D-Wave Quantum has surged 165.56% while IonQ is up 15.24%, according to data from MarketDash.