Where Will Rigetti Computing Be in 10 Years?

Rigetti Computing (NASDAQ: RGTI) is a "pure play" quantum computing company that went public by merging with a special purpose acquisition company (SPAC) three years ago. It designs and manufactures its own quantum processing units (QPUs), builds full quantum computing systems, and hosts a cloud platform for developing quantum applications.

Rigetti has been a wildly unpredictable stock. It opened at $9.75 per share on the first day after closing its SPAC merger, sank to a record low of $0.38 in May 2023, but now trades at around $8. With a market cap of $2.38 billion, it's already valued at a whopping 170 times this year's sales. Let's look ahead and see if Rigetti can justify its sky-high valuations over the next decade.

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Why are investors paying such a high premium for Rigetti's stock?

Traditional computers still store their data in binary bits of zeros and ones. Quantum computers can store zeros and ones simultaneously in qubits, which allows them to process larger amounts of data at a much faster rate than their binary counterparts. However, quantum computers are still much bigger, pricier, and prone to make more mistakes than binary computers.

As a result, these systems are still mainly used by government and research institutions for niche purposes. Alphabet's CEO, Sundar Pichai, recently predicted it would take at least five to 10 years for "practically useful" quantum computers to arrive.

So, while quantum computing companies like Rigetti aren't generating much revenue yet, some bullish investors believe that investing in them today might be comparable to investing in Nvidia right before the AI boom started in the late 2010s.

Rigetti stands out in this nascent market because it's a full-stack quantum computing company that serves as a "one-stop shop" for chips, full systems, and cloud-based services. It aims to make quantum computing more accessible with cheaper commercial systems, modular systems that link together multiple systems, and a robust cloud platform for building quantum apps.

But how much bigger could Rigetti grow over the next 10 years?

In 2024, Rigetti only generated $11 million in revenue while racking up a net loss of $201 million. Its biggest customers include the Superconducting Quantum Materials and Systems Center, the Air Force Research Lab, and the Horizon Quantum Computing in Singapore.

For 2025, analysts expect Rigetti's revenue to rise to $14 million as it narrows its net loss to $70 million. That near-term growth should be driven by its Novera QPU, a smaller 9-qubit computer that costs roughly $900,000 and targets commercial customers; its 84-qubit Ankaa-3 quantum computing system for higher-end government and research clients, and the upcoming launch of a modular system which links together four of its 9-qubit chips to create a 36-qubit system.

In 2026, it aims to launch a non-modular 100-qubit system. Over the next few years, it plans to launch an even more powerful 336-qubit system. It expects its median gate fidelity, or the rate at which it detects errors, to improve from 99% today to 99.5% in its upcoming systems.

To look even further ahead, we should look at a few market estimates. According to Market Research Future, the quantum computing market could still expand at a compound annual growth rate (CAGR) of 28.5% from 2025 to 2035. Metatech Insights expects the market to grow at a CAGR of 28.7% during the same period. We should take those estimates with a grain of salt, but they suggest the earliest and most successful movers will reap massive profits over the next decade.

If Rigetti matches Wall Street's forecast of $14 million in revenue in 2025 and grows at a CAGR of 29% over the following 10 years, it would generate $178 million in revenue in 2035. That would be an impressive growth trajectory, but Rigetti is already valued at 13 times the final year's estimate -- so a decade of growth might already be baked into its current market cap.

However, those estimates might be too conservative if the quantum computing market actually replicates the AI market's growth trajectory. From fiscal 2015 to fiscal 2025 (which ended this January), Nvidia's revenue grew at a CAGR of 39% as its sales of AI data center GPUs exploded. If Rigetti grows at that same CAGR through 2035, its revenue will reach $384 million by the final year -- and it might seem a bit cheaper (but still expensive) at 6 times that estimate.

Rigetti is still a highly speculative stock

Rigetti is a tough stock to value because its core market is still in its infancy. If quantum computers fail to crack the mainstream market over the next decade, Rigetti's valuations will quickly collapse. But if the market expands at a faster-than-expected rate, it could blow past analysts' estimates and force them to recalculate its growth potential.

I think Rigetti's stock is a bit too hot to handle right now, although it might grow into its valuations if it outlasts its peers in its fragmented industry. Therefore, I'm cautiously optimistic that it can head a little higher over the next decade -- but I don't think it can consistently outperform the S&P 500 until its market becomes more fully developed.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.