Valued at a market capitalization of just $116,000, Zapata Computing (ZPTA) may appear tempting to investors. Its business touched quantum computing software solutions, such as through its Orquestra product. In recent years it had also pivoted to generative artificial intelligence, looking to gain a foothold in red-hot markets. However, despite its origins and juicy price targets from analysts, investors need to heed a key warning. Zapata Computing is out of business. 

The Rapidly Expanding Quantum Computing Market

According to a research report from Fortune Business Insights, the global quantum computing market is forecast to grow from $885.4 million in 2024 to $12.6 billion in 2032, indicating a compounded annual growth rate of 34.8%. This growth will be driven by the problem-solving capabilities of quantum computers for AI applications, which include image and speech recognition. 

Integrating quantum computing with generative AI could transform business analytics by enabling faster data processing and sophisticated machine learning capabilities. Several companies are investing heavily in this segment to gain a first-mover advantage. For example, in 2023, International Business Machines (IBM) and Moderna (MRNA) collaborated to advance mRNA research through quantum computing and AI technologies. 

What to Know About Zapata Computing Stock 

Zapata Computing was positioned to benefit from multiple secular tailwinds in the upcoming decade. However, the company announced the cessation of operations last October due to financial distress and its unpaid debt. The company was then delisted from the Nasdaq, leaving its shares to trade on the over-the-counter market.  

In the second quarter of 2024, Zapata Computing reported revenue of $2 million with a gross margin of 36%. However, its operating expenses and research and development outflow totaled more than $8 million. Zapata Computing ended Q2 with $7.2 million in cash, while its free cash outflow stood at $6.1 million in the June quarter. Importantly, its long-term debt totaled $2.1 million. 

It's evident that Zapata would have needed to raise additional capital to fuel its cash burn rate and service its debt obligations. Instead, the company chose to wind up operations and close up shop. 

Of the two analysts covering Zapata Computing, one recommends a “Strong Buy” and one recommends a “Moderate Buy.” The average target price for the tech stock is $1.62, much higher than the current trading price of $0.003. However, these two target estimates were provided before the company announced it would shut down operations. Investors should be mindful of this and avoid getting dazzled by the appearance of high upside potential. 

The Key Takeaway

The quantum computing market is growing rapidly, and several other companies are gaining popularity on Wall Street. Investors with a high risk appetite can consider gaining exposure to these growth stocks to benefit from outsized gains in the upcoming decade. But for Zapata, the story is over.