Where Will Rigetti Computing Be in 3 Years?

The small but ambitious company, Rigetti Computing, still has significant challenges to overcome in the quantum computing space.

Rigetti Computing (RGTI 7.07%), known for developing quantum computing systems, became a publicly traded company on March 2, 2022, through a merger with a special purpose acquisition company (SPAC). Initially, the stock started strong at $9.75 a share, however, it fell dramatically, reaching a low of just $0.38 on May 3, 2023. This decline was largely due to the company failing to meet its pre-merger expectations, facing substantial financial losses, and dealing with the unforeseen resignation of its founder Chad Rigetti from key positions in December 2022. The general increase in interest rates also drove many investors away from speculative stocks during this period.

Today, Rigetti's stock has rebounded and is trading around $13.50. An investment of $10,000 at its lowest point would now be worth about $333,260 in less than two years, indicating a remarkable recovery. The real question is whether Rigetti can continue this upward trend in the next three years.

Why Did Rigetti Computing Impress Investors?

Unlike traditional computers that operate using binary bits (zeros and ones), quantum computers utilize quantum bits, or qubits, allowing for simultaneous representation of zeros and ones. This capability enables quantum systems to process vast amounts of data more rapidly and efficiently than the fastest supercomputers currently available.

However, quantum systems are still larger, more costly, and prone to errors compared to classical computers. Presently, they serve specific sectors such as academia and government, mostly for specialized research. As technological advancements make these systems smaller, cheaper, and more reliable, their potential for broader application is promising, particularly in fields like analytics and artificial intelligence.

Rigetti not only designs and manufactures its own quantum processing units (QPUs) but also builds various types of quantum computing systems and maintains a cloud infrastructure for quantum application development. This comprehensive approach positions Rigetti as a significant player in the emerging quantum computing market.

In December of last year, Rigetti introduced its Novera QPU, a 9-qubit model priced at $900,000, attracting notable clients such as the Superconducting Quantum Materials and Systems Center (SQMS) and the Air Force Research Lab (AFRL). Additionally, they launched their first 84-qubit Ankaa-3 quantum computing system capable of achieving over 99% error detection, enhancing the capabilities of its cloud platform.

These product launches signal potential growth for the company, even in the absence of its founder's leadership. While Chad Rigetti remains involved in product development, Dr. Subodh Kulkarni has taken over the role of CEO.

Future Plans for Rigetti

In 2023, Rigetti aims to unveil a modular quantum computing system, linking four of its 9-qubit chips to create a combined 36-qubit system with an impressive median gate fidelity of 99.5%. By the close of 2026, the company plans to introduce a nonmodular system boasting over 100 qubits and a similar fidelity rating, in addition to a more advanced 336-qubit system expected shortly afterward.

Analysts anticipate Rigetti will generate around $11 million in revenue for 2024. This figure is projected to rise by 41% to $16 million in 2025, and jump by 127% to $35 million in 2026 as the firm expands its commercial systems and cloud services. While this growth trajectory appears promising, Rigetti currently has an enterprise value of $3.7 billion, leading to a high price-to-sales ratio of 105 times the projected sales for 2026. Additionally, the company is not expected to reach profitability in the near future.

Concerns have emerged following Kulkarni's comments advising investors to lower expectations for the short-term outlook of the quantum computing market. Similarly, Nvidia CEO Jensen Huang highlighted the need for patience, asserting that effective quantum computing solutions remain several decades away.

Despite these challenges, the quantum computing market is projected by Fortune Business Insights to grow at a compound annual growth rate (CAGR) of 34.8% from 2024 to 2032. Should Rigetti keep pace with this growth, revenue could reach $120 million by the end of that period. Nonetheless, the company's current valuation is already over 30 times the optimistic revenue estimate for 2025.

Outlook for Rigetti in Three Years

In conclusion, Rigetti is likely to remain a volatile company influenced by news and market sentiment over the next three years. It is possible for the stock to decline significantly, even beyond 90%, before achieving a valuation that aligns better with its growth potential. Therefore, maintaining a cautious stance on Rigetti's performance in the market through 2028 seems prudent as its high valuations may cool and settle at more reasonable levels.

Quantum, Computing, Growth