After Receiving $100 Million in Government Funding, Are Rigetti Computing and D-Wave Quantum the Best Quantum Computing Stocks?

Last month, the U.S. government announced it would take stakes in a handful of quantum computing companies, including D-Wave Quantum (NYSE: QBTS) and Rigetti Computing (NASDAQ: RGTI). Both will receive up to $100 million in equity investment.

It has historically been rare for the U.S. government to take equity stakes in companies, with it generally happening during periods of severe economic distress. The government would also generally divest its stake once the companies were healthy.

However, the Trump administration has been more proactive with investments, instead looking to form partnerships in the interest of national security and to reduce reliance on foreign competitors. An earlier investment in Intel proved to be very fortuitous, as the stock has since skyrocketed. Meanwhile, with quantum computing expected to be the next big technology after artificial intelligence (AI), it appears the U.S. government wants to have some control over what could become a world-altering technology.

The question, though, is whether the government's investment is a validation of quantum computing technology or just a speculative bet. Are Rigetti and D-Wave worth investing in? Let's take a closer look at the two stocks.

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Rigetti

Rigetti is set to get up to $100 million over three years to help support research and development to overcome some of the big technical challenges associated with advancing and scaling superconducting quantum computing. The company's superconducting technique has proven to be very fast, but it greatly trails in accuracy to other techniques like trapped-ion.

That's the biggest issue facing the company and its technology at this time. It had to delay its new 108-qubit Cepheus-1-108Q system to improve its accuracy, and when it did release it, its 99.1% 2-qubit gate fidelity (accuracy) missed the 99.5% median 2-qubit gate fidelity it was shooting for at release. The company's technology also wasn't chosen to advance to Stage B of the Quantum Benchmarking Initiative (QBI) for the U.S. Defense Advanced Research Projects Agency (DARPA). This is a Pentagon-funded program to help find and support the best quantum computing technologies, so this was a big blow.

D-Wave Quantum

D-Wave Quantum will get a $100 million investment to help accelerate the development of its annealing and gate-model quantum computing technologies, specifically its 100,000-qubit annealing system and a 10,000-qubit gate-model system.

D-Wave is a leader in quantum annealing technology, which is a narrower, specialized technology that shines at solving optimization problems by settling on the best or close to the best answers for complex problems. The technology is further along than broad-based quantum computing, with the company already selling machines for commercial use to industries like finance, logistics, and defense.

However, annealing is not the big quantum computing riddle companies are trying to solve, and as such, D-Wave is looking to apply its annealing expertise to traditional gate-based quantum computers. With its acquisition of Quantum Circuits, it is now pursuing a dual-rail qubit architecture, which it says will have the fidelity of the trapped-ion technology with the speed of superconducting qubits. However, it has not released any technical milestones yet that support this claim.

The verdict

One notable thing about the investments the government made is that they are spread among companies pursuing quantum computing in very distinct ways. Rigetti, for instance, is taking a traditional superconducting approach, while D-Wave is pursuing a dual-rail qubit architecture based on its leadership in quantum annealing. Meanwhile, the government is also investing in Infleqtion (NYSE: INFQ), which uses a neutral-atom approach to quantum computing, and Quantinuum (NASDAQ: QNT), which is pursuing trapped-ion technology.

Overall, the government's investments look like a widespread bet on different competing quantum technologies and not really on individual stocks. As such, I wouldn't necessarily look at it as a validation of the stocks. I'd continue to view both D-Wave and Rigetti as highly speculative at this point, and actually prefer stocks pursuing trapped-ion technology, like IonQ (NYSE: IONQ) and Quantinuum, given the technology's accuracy edge. IonQ has achieved 99.99% 2-qubit gate fidelity, and Quantinuum 99.92%, giving them a distinct advantage in this area.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and IonQ. The Motley Fool has a disclosure policy.