Better Quantum Computing Stock: Rigetti Computing vs. D-Wave Quantum
Key Points
Rigetti's gate-based approach offers more long-term upside, while D-Wave's hybrid systems generate steadier near-term revenue.
D-Wave has the edge on survival metrics, with a larger cash position and an equivalent operating loss.
But Alphabet offers quantum exposure without the existential risk, backed by a business that can fund R&D indefinitely.
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Rigetti Computing (NASDAQ: RGTI) and D-Wave Quantum (NYSE: QBTS) are two of the most popular pure-play quantum computing stocks on the market. Which one has the edge in the race to bring this revolutionary technology to market?
Rigetti and D-Wave are taking very different approaches
Without getting too technical -- there is a lot of industry jargon -- Rigetti builds quantum computing systems and sells access to them. The company is still very much in research-and-development mode, and its income tends to be very "lumpy" -- that is, it varies greatly quarter to quarter.
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D-Wave has chosen to commercialize sooner, offering access to "hybrid" systems that combine quantum and classical computing. It has somewhat steadier income because of that, though that's all relative in this industry.
I'd give the edge to Rigetti in this respect. Its approach is generally considered to have more upside and greater long-term potential. That's why most investors are interested in quantum in the first place.
The numbers: Rigetti vs. D-Wave
All that is nice, but what are the actual numbers? Let's compare some key figures:
| Company Name | Revenue (TTM) | Free Cash Flow (TTM) | Cash and Equivalents |
|---|---|---|---|
| Rigetti Computing | $7.5 Million | ($67.6 Million) | $447.0 Million |
| D-Wave Quantum | $24.1 Million | ($54.8 Million) | $836.2 Million |
I'd have to give the edge here to D-Wave, not for its higher sales, but for the fact that the company has a longer runway before it has to raise more cash, at least as it stands today. What really matters at this point is how long these companies can survive without diluting their shareholders further than they already have.
The timeline problem for quantum computing
And that's the key. Quantum computing -- the real commercial kind that delivers significant value -- could be much further off than those in the industry hope. While some bulls think it's just a few years off, there's plenty of reason to believe it will be much longer.
Morningstar's analysis puts early quantum commercialization at five to 10 years away, while general-use quantum computing -- what we're after -- is likely 20 years out.
At current burn rates -- which are likely to grow significantly as the technology matures and the companies prepare to scale -- neither can fund that runway without repeatedly selling more shares, diluting existing investors along the way.
A smarter way to invest in quantum computing
In my view, neither company is worth investing in at this point -- not when they carry multi-billion dollar market capitalizations. There is far too much uncertainty to justify those valuations.
If you want quantum exposure, I would look outside of the pure plays to Alphabet. The company offers arguably the most advanced quantum research program there is. It has the resources to fund quantum R&D indefinitely while Rigetti and D-Wave fight to survive.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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