.png)
Or: How I Learned to Stop Worrying and Love Shorting the Quantum Dream
Something remarkable happened yesterday in the ETF world, and by “remarkable” I mean “the kind of thing that makes you check if you're having a fever dream.” Defiance ETFs (who, true to their name, absolutely refuse to be normal) launched three new 2x leveraged inverse ETFs targeting some of the hottest stocks in tech. Not categories. Not indices. Specific companies.
They've introduced products that let you bet against IonQ (ticker: IONZ), Palantir (PLTZ), and Super Micro Computer (SMCZ). With 2x daily leverage. During one of the most spectacular momentum rallies these names have ever seen.
This is the financial equivalent of setting up a lemonade stand in front of a five-alarm fire.
The Setup: When Quantum Computing Meets Reality
Let's establish some context here. IonQ, the poster child of pure-play quantum computing, has been on an absolutely unhinged run. The stock is up roughly 300% over the past year, trading at a price-to-sales ratio that would make even the most delusional dot-com entrepreneur blush. We're talking 260x sales. For reference, that's not a typo or a temporary glitch in your Bloomberg terminal.
The company just did a 1-for-6 reverse stock split on December 9th (yesterday, coincidentally), which is usually the kind of manoeuvre that signals “hey, our stock was getting embarrassingly cheap.” Except IonQ's stock wasn't cheap. It was trading in the $3-4 range after absolutely cratering from highs near $23 earlier this year. The reverse split was essentially financial plastic surgery to maintain respectability.
Meanwhile, the quantum computing sector has collectively lost its mind. Rigetti Computing is up 1,720% year-over-year. D-Wave Quantum has surged 1,300%. These are companies with minimal revenue, burning cash at rates that would make a crypto founder nervous, and valuations that assume quantum supremacy is arriving next Tuesday.
Enter Defiance, stage left, with a product that says: “You know what this situation needs? More leverage.”
The Products: Weaponisd Scepticism
Let's break down what Defiance actually created here:
IONZ (Defiance Daily Target 2X Short IONQ ETF): This fund seeks to deliver -200% of IonQ's daily return. If IonQ drops 5% today, IONZ should theoretically gain 10%. If IonQ rallies 10%, IONZ gets obliterated by 20%. It's quantum mechanics meets financial engineering, with all the stability you'd expect from that combination.
The timing is chef's kiss perfect. IonQ just announced they've achieved “99.99% two-qubit gate fidelity,” which the company claims makes them the first to reach error rates required for fault-tolerant quantum computing. Whether that's true or marketing hyperbole depends on which physicist you ask, but the stock market heard “quantum milestone” and immediately added another billion to the market cap.
PLTZ (Defiance Daily Target 2X Short PLTR ETF): Now, Palantir isn't technically a quantum company (they're more of a “government data surveillance with a Silicon Valley veneer” play), but they've become so deeply embedded in the AI infrastructure narrative that they trade like they invented the qubit. PLTR shares have been on their own moon mission, and Defiance apparently decided someone needs to sell parachutes.
SMCZ (Defiance Daily Target 2X Short SMCI ETF): Super Micro Computer, the picks-and-shovels play for AI data centres, has had a year so volatile it makes Bitcoin look like a Treasury bond. The stock rallied on AI hype, collapsed on accounting concerns, then rallied again because... well, because AI. Defiance looked at this chart and thought, “Yes, let's add 2x inverse leverage to that.”
The Problem with Shorting Dreams (With Leverage)
Here's where this gets genuinely fascinating from a portfolio construction perspective (by which I mean “absolutely terrifying”).
These are daily rebalanced products. That means if you hold them for more than a day, you're not getting -2x the returns of the underlying stock over that period. You're getting the compounded effect of daily -2x returns, which creates something called “volatility decay” or “beta slippage.”
In plain English: if IonQ goes up 10% one day and down 10% the next, you'd think you'd break even. But IONZ would be down significantly because losses compound faster than gains. These products are designed for day traders, not long-term holders, but we all know what's going to happen. Some poor soul is going to buy IONZ, ignore it for six months, and discover they've somehow lost money even though IonQ is down 30%.
It's like weaponising financial literacy requirements.
The Market Environment: Peak Absurdity
What makes these launches particularly mordant is the current market environment. Quantum computing stocks are trading like it's 1999 and someone just discovered you can sell pet food online. The sector has attracted billions in institutional capital despite:
- Minimal revenue (IonQ did about $37.5 million in revenue last quarter, with a market cap north of $10 billion)
- No clear path to profitability (IonQ lost $1.1 billion in Q3, though much of that was acquisition-related)
- Competition from tech giants with essentially infinite resources (Google, IBM, Microsoft, Amazon)
- Uncertain commercialisation timelines (real quantum advantage might be 5, 10, or 20 years away)
- Valuations that would make a SPAC blush
Into this environment, Defiance brings inverse leverage. It's like showing up to Burning Man with a fire extinguisher and a spreadsheet.
The Bull Case for Shorting (If You Squint)
To be fair, there is a rational thesis here. Multiple analysts have compared the current quantum computing rally to the dot-com bubble, noting that virtually every transformative technology goes through a hype cycle that ends badly for most participants. The internet was revolutionary, but that didn't save Pets.com or WebVan.
Some Wall Street sceptics point out that IonQ's recent growth has come primarily from acquisitions rather than organic revenue. The company has been buying technology and customers rather than building them, funded by dilutive share offerings. When you're raising capital by selling stock at nosebleed valuations to fund acquisitions, you're essentially using your own stock as currency in a game where that currency's value depends on... continued belief in the narrative.
It's turtles all the way down.
Quantum computing will almost certainly be transformative. But that doesn't mean these specific companies at these specific valuations are good investments. The railroad boom was transformative too, but most railroad stocks went to zero.
The Bear Case for Shorting (Which Is More Concerning)
Now the nightmare scenario for anyone buying these inverse products:
What if the Trump administration actually follows through on quantum computing investments? There's been chatter about government backing for quantum research as part of the AI-driven tech race with China. John Martinis, a recent Nobel Prize winner, just told Bloomberg that China has "caught up quickly" in quantum computing, which triggered another rally in quantum stocks.
If the U.S. government decides to pour tens of billions into quantum computing research and commercialization, these stocks could go vertical. And if you're holding a 2x inverse ETF when that happens, you're not just losing money. You're losing money in ways that require scientific notation to properly express.
Imagine shorting defence contractors with leverage in 2001. That's the risk profile here.
The Meta-Commentary: What This Actually Means
Defiance launching these products tells us something important about where we are in the market cycle. When a reputable ETF issuer starts offering weaponised bets against specific hyped stocks, we're probably near some kind of inflection point.
Either:
1. The sceptics are right, quantum computing stocks are massively overvalued, and these products will make fortunes for sophisticated traders who time the collapse correctly, or
2. The sceptics are early, quantum computing has another 18-24 months of momentum-driven gains ahead, and these products will quietly cease trading after suffering catastrophic losses.
There is no middle ground with 2x leveraged inverse products on hypergrowth stocks. You're either brilliantly prescient or catastrophically wrong.
The Practical Reality
Here's what will actually happen with these products:
Some hedge funds and sophisticated day traders will use them for tactical hedges or short-term bets. A handful will make significant profits catching pullbacks in these volatile names. Most retail investors who buy them will hold too long, suffer from volatility decay, and wonder why they're down even when the underlying stock dropped.
Meanwhile, IonQ will continue making announcements about quantum milestones, partnering with cloud hyperscalers, and acquiring competitors. The stock will be volatile enough to give financial masochists their daily adrenaline fix. And Defiance will collect its expense ratio (1.29% for IONZ) regardless of whether anyone actually makes money.
It's beautiful, in a very dark, very efficient-market kind of way.
The Conclusion: Portfolio Construction as Performance Art
What Defiance has created here isn't just an ETF suite. It's a philosophical statement about markets, hype cycles, and human nature. These products exist because there's demand for them, which means there are traders who looked at the quantum computing rally and thought, “I could get even more wrong about this if I just had the right tools.”
And honestly? That's kind of perfect.
Quantum computing promises to solve problems that classical computers can't touch. It will revolutionize cryptography, drug discovery, materials science, and optimization at scales we can barely imagine. The technology is real, the potential is enormous, and the long-term impact will be transformative.
But that has absolutely nothing to do with whether IonQ at 260x sales is a good investment right now.
Defiance is offering you the opportunity to bet against that proposition with 2x leverage and daily rebalancing. Whether that makes you a disciplined value investor or a degenerate gambler probably depends on your time horizon, risk tolerance, and willingness to check your portfolio every 30 minutes.
Either way, it's going to be entertaining.
Comments