Forget Rigetti Computing: This Dividend‑Paying Powerhouse Has a Much Stronger Upside

Is Rigetti Computing (NASDAQ: RGTI) stock a buy?

Crunching the numbers last month, I concluded that Rigetti stock probably is not a buy, at least not in the short term, because a lack of new sales announcements of quantum computing systems implies the stock probably missed earnings in the fourth quarter.

(We'll find out whether I was right about that in just a couple of weeks, when Rigetti reports its Q4 results on March 4.)

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The trouble with Rigetti

More recently, my colleague John Bromels highlighted another risk for Rigetti stock, which suggests it could be literal years before anyone knows if Rigetti stock is even "commercially viable," much less a stock valued cheaply enough that it's a buy.

As Bromels explains: "For a quantum computer to be commercially viable, it's estimated to need at least 1 million physical qubits and 99.99% two-qubit gate fidelity (and probably closer to 99.99999%)." Rigetti, meanwhile, doesn't have even 1,000 qubits to its name (nor is it 99.9% accurate), and is probably at least a half-decade away from passing "the 1 million-qubit threshold."

Translation: You probably won't know if Rigetti has a viable business, much less one that can compete with other, more viable businesses that are outracing Rigetti, for another five years.

What we do know about Rigetti is that, right now, it's losing about $350 million a year, and its losses have increased every year for the last five years. We also know that, according to analysts polled by S&P Global Market Intelligence, Rigetti isn't expected to earn any profit whatsoever through at least 2030, and possibly longer -- which tallies with the whole "commercially viable" thing.

When it comes to being commercially viable, Rigetti isn't yet. And it may never be.

A better idea than Rigetti: IBM

Don't get me wrong. Rigetti's not totally a lost cause. The same analysts who doubt Rigetti's path to profits do admit it's not burning cash terribly fast. With nearly $450 million in the bank, and only $150 million in cash burn projected between now and 2028, Rigetti has the cash it needs to remain alive... at least long enough for investors to figure out if it can become "viable."

Still, Rigetti's a bit of a gamble -- and if you ask me, there's a safer way to bet on quantum computing becoming a viable technology: IBM (NYSE: IBM).

IBM has been researching quantum computers even longer than Rigetti, after all, and has already racked up more than $1 billion in orders for various quantum "tests, trials, and explorations." (This is as compared to Rigetti, which is doing barely $7.5 million in annual sales.) IBM is working on a "fault-tolerant" quantum computer and expects to have a commercially viable option ready by 2029.

IBM's also significantly more financially viable than Rigetti. The computing giant earned $10.6 billion in profit over the past year, and generated even more free cash flow -- $11.6 billion. With a much more diversified business, IBM's earnings are growing north of 7% annually.

Priced at 22.6 times trailing earnings, with a price-to-free-cash-flow ratio of only 20.6, and with a 2.6% dividend yield, IBM may not be the sexiest way to invest in quantum computing, but to me, it looks like one of the safest.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.