Rigetti Computing vs. D-Wave Quantum: Which Quantum Computing Stock Is the Better Buy?

Quantum computing is years behind artificial intelligence in terms of its path to commercial viability, but investors are already looking to profit from the companies that can capitalize on the opportunity. Rigetti Computing (NASDAQ: RGTI) and D-Wave Quantum (NASDAQ: QBTS) are two of the industry's most popular pure-play picks on Wall Street. Here's how they compare.

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Both companies are receiving government support

It's no secret that quantum computing companies are burning through cash. It may be years before the technology reaches the point where it can be deployed commercially at scale, and before its use translates into meaningful profits. The U.S. government wants to support the development of quantum computing domestically, which is why it invested up to $100 million each in Rigetti Computing and D-Wave Quantum, using funds earmarked under the 2022 CHIPS and Science Act.

D-Wave Quantum may need that funding a bit more. It reported a $53.3 million loss from operations in the second quarter, compared to Rigetti Computing's $28.1 million operating loss. Rigetti Computing also closed out the quarter with more revenue than D-Wave Quantum, but the latter saw its first-half backlog surge by 1,120% year over year to $35.5 million. Notably, not all of that revenue will be realized over the next year.

While neither company will shine with their price-to-sales metrics anytime soon (and neither will have a P/E ratio to brag about at all for as long as they have no earnings), it's worth keeping in mind the pace at which they burn cash. D-Wave Quantum is spending money faster, but if it can continue to post impressive backlog growth and start to realize more revenue, it can scale over time.

The technology is different

Although Rigetti Computing and D-Wave Quantum are both quantum computing stocks, they're primarily pursuing the market in different ways.

For most of its existence, D-Wave Quantum has put its efforts into quantum annealing technology. This is a niche subset of the technology that is useful almost exclusively for solving optimization problems. That limits it -- but optimization problems do represent a significant slice of the types of computations users want to apply quantum computing to.

Rigetti Computing is developing a general-purpose quantum computer built around superconducting qubits. Its universal gate-model system will be capable of solving a broad array of extremely complex problems. For instance, Rigetti's tech could simulate chemical processes in the human body to predict drug efficacy and toxicity early in drug development, helping save pharmaceutical companies years of development time and bring new products to market faster. D-Wave Quantum's technology isn't built for that, but it offers a faster path to commercialization and scale, while Rigetti Computing's has a higher ceiling once it masters building systems with fault-tolerant logical qubits.

However, D-Wave Quantum recognized that the universal gate-model system has a higher ceiling. That's why early this year, it acquired Quantum Circuits, another pure play that was developing a superconducting qubit gate-model quantum computing system. D-Wave expects to start delivering this type of technology to clients by 2030, while Rigetti is already delivering it to cloud computing providers like Amazon.

It all comes down to risk tolerance

Investing in either of these quantum computing stocks requires considerable risk tolerance. While both are down sharply over the past year, they still have nosebleed valuations on a price-to-sales basis. However, even in this speculative space, some stocks are riskier than others.

D-Wave Quantum has a clearer path to revenue recognition and a rapidly expanding backlog. While it's burning through cash more rapidly, it also has more revenue visibility.

Rigetti Computing is growing its revenue at a faster rate than D-Wave Quantum, but it doesn't publicize a large backlog. Furthermore, Rigetti is deeper in the journey toward broad-use quantum computing than D-Wave Quantum, but it faces a longer path to meaningful revenue or profitability.

Rigetti Computing also has a $5 billion market cap, compared with D-Wave Quantum's $6 billion. While Rigetti Computing's status as a smaller company technically gives it more room to expand, their market caps are so close to each other that the difference is not worth considering in an investment decision.

Both are speculative pure-play quantum computing stocks that are receiving some government help and have some early customers. D-Wave Quantum is the better pick for investors seeking a lower risk option, while Rigetti Computing offers a higher-risk, higher-reward choice.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.