Rigetti Computing’s Quantum Potential: An Investment Overview
Quantum computing has transformative potential for material discovery, drug research, and disease treatment. This promise is drawing considerable interest in quantum computing stocks, particularly Rigetti Computing (NASDAQ: RGTI), which has surged 943% over the past year.
While the gains are noteworthy, investors must consider the implications of buying Rigetti’s stock now and project where the company might stand in three years.
Market Opportunity versus Current Reality
Quantum computers could surpass the capabilities of today’s most powerful computers by processing data in multiple states simultaneously. Unlike traditional computers that use binary 0s and 1s, quantum computers can handle larger data sets efficiently and execute complex calculations more rapidly.
This technology’s allure lies in its projected market potential, estimated to reach $173 billion by 2040. Rigetti develops hardware, software, and quantum systems utilized by prominent tech giants such as Microsoft and Amazon, presenting competitive advantages through its integrated offerings.
However, quantum computers currently encounter significant errors compared to traditional machines. Ongoing discussions about their practical applications suggest that widespread usability is still years away. For instance, Alphabet, which is developing its own quantum computing program, stated it may take another five years before practical uses emerge.
Future Projections for Rigetti
Analyzing Rigetti’s current status is essential for assessing its future. In Q1 2025, Rigetti’s sales fell 52% year-over-year to $1.5 million. This decline compounded a 10% drop in 2024, where total sales reached $10.8 million.
Rigetti is not profitable, registering an operating loss of nearly $22 million in the quarter, worse than its $16.5 million loss from the previous year. Management does not forecast significant revenue changes in the near term. CEO Subodh Kulkarni remarked during a recent earnings call that achieving “quantum advantage” could take at least three to five years.
Thus, sales growth may only materialize in the medium to long term, casting doubt on its attractiveness to investors. Rigetti remains a highly speculative investment at this time.
Current Valuation Challenges
With Rigetti’s substantial rise in share price, the stock now boasts a price-to-sales ratio of 290, which is extremely high. For Rigetti to justify its current valuation, exceptional growth is essential over the next three years, which could make achieving positive stock returns challenging.
Investment Recommendation
Given Rigetti’s management expectations of minimal revenue growth and its high current valuation, it may be prudent to avoid investing in this stock for the time being. Until revenue increases significantly and quantum computers demonstrate their practical utility, investors might risk overpaying for a speculative asset in an uncertain market.
Should You Invest Now?
Before considering an investment in Rigetti Computing, reflect on this:
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
