Why Rigetti Computing Stock Slumped on Friday
Key Points
Hot inflation data sent speculative stocks like Rigetti tumbling as investors brace for the Fed to delay rate cuts.
A price target cut on rival D-Wave Quantum added pressure across the quantum computing sector.
Rigetti's current valuation prices in enormous success that remains far from guaranteed.
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Shares of quantum computing company Rigetti Computing (NASDAQ: RGTI) tumbled Friday, finishing the day down 6.6%.
A one-two punch hit the stock: a hotter-than-expected inflation report and a Wall Street price cut on shares of quantum computing peer, D-Wave Quantum.
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Rigetti stock is sliding on troubling economic data
Friday's producer price index (PPI) showed core wholesale prices surging 0.8% in January -- nearly triple the 0.3% economists had forecast. The hot inflation numbers likely mean the Federal Reserve will hold off on any rate cuts for longer than expected, and that is not good news for more speculative stocks like Rigetti's.
When interest rates stay elevated, investors are less willing to pay a premium for future profits, especially when those profits are as uncertain as Rigetti's.
Image source: Getty Images.
D-Wave Quantum stock gets a price cut
On top of that, analysts at Mizuho slashed its price target on D-Wave stock from $46 to $40 on Friday. The company is a close rival of Rigetti, and at this point, investors tend to tie the fates of all of the quantum pure-plays together.
Is Rigetti stock worth buying on the dip?
Quantum computing may well transform entire industries someday. But I think "someday" has a good chance of being much further off than quantum bulls would hope. Rigetti's valuation is still pricing in enormous success that is far from guaranteed. I wouldn't invest until Rigetti's valuation is more in line with reality.
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Johnny Rice 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.
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