Is Rigetti Computing Stock a Buy Now?

Key Points

• The quantum computer sector is hot, helping to propel Rigetti Computing's shares by more than 1,500% in the past year.

• The company unveiled a powerful quantum computer that puts Rigetti a step closer to achieving quantum advantage.

• Rigetti faces declining revenue and rising costs, but exited Q2 with substantial cash and investment reserves of over $570 million and no debt.

• 10 stocks we like better than Rigetti Computing ›

Rigetti Computing (NASDAQ: RGTI) is among the stocks benefiting from investor interest in the quantum computing field. The company's shares are up over 1,500% in the past 12 months through Aug. 27.

Rigetti and other businesses in the sector are developing technology with the potential to transform industries, including medicine and artificial intelligence. Because quantum computers are powered by atomic particles, they boast computational capabilities beyond the reach of current classical computers.

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However, they also have shortcomings that hinder their widespread adoption. One key drawback is that errors creep into quantum computations due to the extreme difficulty of isolating and controlling quantum states. While quantum computing is inherently probabilistic (which is actually useful for many algorithms that rely on randomness), the real challenge is that environmental noise and imperfect controls corrupt these probabilities. Finding and correcting these errors -- distinguishing between intended quantum randomness and unwanted noise -- is one of the field's key issues.

Can Rigetti's tech overcome such challenges? Discovering the answer requires diving into the company in more detail.

Image source: Getty Images.

Rigetti's technological prowess

Rigetti's technology employs superconducting qubits, a widely used approach to quantum computing due to its advantages. This method performs faster than other quantum techniques and leverages existing semiconductor chip fabrication processes, which helps to scale up the technology.

In recent weeks, Rigetti unveiled its latest invention, the Cepheus-1-36Q. This multi-chip quantum machine is the largest in the industry, according to the company. Moreover, the device's calculation error rate is half that of its predecessor.

The Cepheus-1-36Q shows Rigetti is making progress toward overcoming the issues inherent in quantum computers. Despite that, the company isn't growing sales this year. In the second quarter, Rigetti generated $1.8 million in revenue, which was down from $3.1 million in 2024.

A look into Rigetti's financials

While the company has struggled to produce revenue, its costs are climbing. Rigetti's Q2 cost of revenue and operating expenses both ticked up from 2024, resulting in an operating loss of $19.9 million versus a loss of $16.1 million in the previous year.

The costly combination of rising expenses and declining sales is cause for concern. Rigetti's saving grace is that it amassed an impressive $571.6 million in cash, cash equivalents, and available-for-sale investments with no debt on its balance sheet. The funds can sustain operations in the short term as the company builds up income.

The quest to increase sales relies on how quickly Rigetti's tech can achieve quantum advantage. This is the point at which a quantum device can solve useful, real-world problems more effectively than classical computers.

According to CEO Dr. Subodh Kulkarni, Rigetti is about four years away from achieving quantum advantage. In the meantime, it's cobbling revenue together from organizations interested in quantum computing for research and experimentation, such as its collaboration with Montana State University announced on Aug. 20.

Factors to consider before deciding on Rigetti stock

At this early stage in quantum computing's development, Rigetti's future depends on reaching quantum advantage as fast as possible. Once there, it can unlock more sales as its technology becomes a superior alternative to classical supercomputers.

Can Rigetti achieve this goal in four years? Its shares are trading as if that's likely.

Here's a look at the stock's valuation using the price-to-sales (P/S) ratio, and contrasting it to other pure-play quantum computing competitors IonQ and D-Wave Quantum. This metric measures how much investors are willing to pay for every dollar of revenue generated over the trailing 12 months.

Data by YCharts.

Rigetti's P/S multiple is sky-high compared to its rivals, indicating that shares are expensive. Perhaps investors are betting the company can achieve quantum advantage.

But a lot can happen in four years, and if Rigetti continues to burn through cash with little revenue trickling in, the business may not survive to achieve its goal.

In addition, many well-heeled competitors, including Alphabet-owned Google, are actively pursuing quantum advantage. Google has already developed a quantum chip capable of completing a complex computation in five minutes that would take centuries with today's fastest supercomputers. Granted, this algorithm is a benchmark designed to be easy for quantum computers and hard for digital system, but it's still an impressive achievement.

Although it's too early to tell which business will deliver the dominant technology, one or more of these rivals could build a scalable quantum computer that overcomes the obstacles to broad adoption. This competition impacts Rigetti's ability to attract customers, as evidenced by its difficulties with revenue growth.

Consequently, only investors with a high risk tolerance should consider buying Rigetti shares. Even then, given its stock's inflated valuation, the ideal approach is to wait for the share price to drop before deciding to invest.

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Robert Izquierdo has positions in Alphabet and IonQ. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.