Should You Invest $1,000 in Quantum Computing Competitor Rigetti Computing?

Key Points

• Rigetti Computing is a pure-play quantum computing investment.

• Investors must understand the risks associated with investing in Rigetti.

• A massive quantum computing market is expected to emerge by 2030.

• 10 stocks we like better than Rigetti Computing ›

Quantum computing is an intriguing investment field. Right now, there's a ton of money pouring into the technology, but it really isn't adding any value back into the economy. That's because it's still a fledgling technology that's working its way toward commercial viability. However, once it reaches that point, the companies involved in this space could see their stocks skyrocket alongside demand.

Rigetti Computing (NASDAQ: RGTI) is a company in the quantum computing race, and it's a popular pick among investors. However, is now the right time to invest $1,000 into the stock?

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Rigetti Computing is a high-risk, high-reward investment

Rigetti Computing is a pure play within the quantum computing investment realm, which means it's quantum computing relevancy or bust. This has several benefits and drawbacks.

On the positive side, the company is laser-focused on quantum computing and is devoting every bit of its resources to investing in the technology and bringing it to market. Additionally, if Rigetti Computing succeeds in its goal to achieve quantum computing relevancy, its stock is primed to soar because it has no revenue to speak of right now (besides some that it gets from research contracts). Rigetti Computing is only a $4 billion business, so it has immense upside if it can achieve significant growth.

The downside of investing in quantum computing pure plays is that there is no backup plan. If another competitor and its technology surpass Rigetti's, the stock becomes obsolete, and every share is worthless, ultimately sending the stock to $0. That's a grim outlook, but it's entirely within the realm of possibility.

Furthermore, because its only cash sources are various contracts, issuing new shares, or taking on debt, it doesn't have the financial backing that some of the large tech companies competing in quantum computing have. For example, one large competitor in this space is Alphabet, the parent company of Google. Over the past 12 months, Alphabet produced a jaw-dropping $75 billion in free cash flow. It means nothing for Alphabet to sink $1 billion into the quantum computing race -- a sum of money that Rigetti can only dream of.

Investing in Rigetti Computing is a high-risk endeavor, but if it pays off, shareholders could reap substantial rewards.

2030 is a key milestone in quantum computing

To invest in a stock as risky as Rigetti Computing, investors need to be assured that there's an adequate payoff should it win the quantum computing race. Quantum computing has applications in many fields, such as weather forecasting, logistics networks, and artificial intelligence (AI). Numerous other problems can likely be solved by quantum computing which haven't been explored yet.

However, it will be a few years before quantum computing becomes widespread.

Rigetti Computing estimates that before 2030, the annual value for quantum computing providers will be around $1 billion to $2 billion. However, it expects that opportunity to expand to $15 billion to $30 billion per year between 2030 and 2040. Should Rigetti capture 20% of that market, that's $3 billion in annual revenue. Since the stock is valued at around $4 billion, there's certainly plenty of room for upside.

So, should you invest $1,000 in Rigetti Computing? I'd say it depends on your portfolio size. If you have $2,000 to invest, then investing $1,000 into Rigetti Computing is a bad idea. If your portfolio is $100,000 or greater, then this may not be a bad idea if you're a firm believer that Rigetti Computing will win the quantum computing race. There's a ton of risk here, so it may be wiser to spread bets out among multiple quantum computing companies.

By keeping your position sizing small, you limit the effect if the stock price reaches zero. But if a 1% position increases 10-fold in value, your portfolio reaps the reward of an incredible investment.

Rigetti Computing is a high-risk, high-reward investment, and people need to understand this before investing any money in the stock.

Should you invest $1,000 in Rigetti Computing right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.