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SUMMARY
Felix Prehn, an economist and investment educator, analyzes the implications of the Trump administration's reported interest in taking equity stakes in quantum computing companies INQ, Rigetti, and D-Wave. The discussion centers on the high short interest in these stocks and the potential for a government-triggered short squeeze, drawing on historical precedents and risk management strategies.
MAIN POINTS
- The Wall Street Journal reports that the Trump Commerce Department is in talks to take equity stakes in quantum computing firms INQ, Rigetti, and D-Wave, all of which have high short interest.
- Historical examples such as Intel, MP Materials, and Lithium Americas show how government investments in heavily shorted companies have previously triggered massive short squeezes.
- A step-by-step explanation is provided on how a government equity stake can force short sellers to cover positions, potentially causing rapid price increases in quantum stocks.
- Detailed breakdowns of INQ, Rigetti, and D-Wave highlight their market positions, technologies, partnerships, and relative risks for investors.
- Instructions are given on how to set up quantum stock alerts in TradeVision and access further research and educational resources.
DETAILED ANALYSIS
Recent developments indicate that the Trump administration, through its Commerce Department, is actively exploring equity investments in quantum computing companies such as INQ, Rigetti, and D-Wave. These firms are characterized by exceptionally high short interest, with INQ alone having 62 million shares shorted, representing about 20% of its float. This level of short interest means that a significant portion of their shares have been borrowed and sold by traders betting on a price decline, creating a scenario where any substantial buying pressure—especially from a major entity like the US government—could force rapid repurchasing of shares, leading to a short squeeze.
Historical precedents reinforce the plausibility of this scenario. The video references the government’s intervention in Intel in August 2025, where a 10% government stake in a heavily shorted environment led to a sharp upward movement in the stock price. Similar patterns were observed with MP Materials, which surged over 200% after a $400 million Department of Defense investment, and Lithium Americas, which doubled following a $2 billion loan and a 5% government stake.
These examples illustrate how government backing not only signals strategic importance but also prompts institutional investors to reassess their positions and triggers panic among short sellers, who face mounting losses and are compelled to buy back shares at escalating prices.
The analysis outlines the mechanics of a short squeeze in the context of quantum stocks. When the government announces an equity stake, institutional buying accelerates, and shorts, who pay daily interest on their positions, are exposed to potentially unlimited losses as prices rise. Traditional short strategies, such as waiting out the squeeze or doubling down, are rendered ineffective in the face of government intervention and the strategic significance attached to quantum technology, especially given its national security implications.
The three quantum companies discussed each present distinct profiles. INQ is the largest, with a $6 billion market cap and partnerships with Microsoft and AWS, and is noted for its trapped ion quantum technology. Rigetti, with an $800 million market cap, uses superconducting quantum technology and collaborates with NASA and the Department of Energy, making it a more speculative but potentially higher-momentum play.
D-Wave, valued at $1.8 billion, is the most established, having operated since 2007 and maintaining relationships with Lockheed Martin, Google, and Los Alamos National Lab. All three are heavily shorted and could experience correlated price movements if government investments materialize.
Risk management is emphasized, with advice to use trailing stops—typically set 20-30% below the current price—to lock in gains during a squeeze and avoid the common pitfall of holding through a full cycle and losing profits. The importance of timing exits is highlighted as a key differentiator between retail and professional investors. Additionally, tools like TradeVision are recommended for setting news alerts and monitoring these stocks in real time, allowing investors to respond quickly to market-moving announcements.
Educational resources and research documents are made available through the Felix & Friends community, supporting informed decision-making in this high-risk, high-reward sector.
LINKS
- Live training on how Wall Street picks better stocks.
- Access to the full research document and private community resources.
- Download the covered call calculator and screener.
- Free masterclass on risk management and spotting market patterns.