IonQ vs. Rigetti Computing: Which Quantum Computing Stock is a Better Buy?

When it comes to discussions about artificial intelligence (AI) investments, many people focus on well-known names like Nvidia, software developers such as OpenAI, and big cloud service providers like Microsoft. However, there is a growing interest in the quantum computing sector and its potential to assist AI technologies.

Quantum computers have the capability of processing binary bits of zeroes and ones simultaneously, unlike traditional computers that handle these bits one at a time. This unique feature allows quantum computers to tackle larger amounts of data much more quickly. However, they are still larger, more costly, and have higher error rates compared to traditional computers. For these reasons, their application in AI is not as widespread compared to high-performance GPUs used in data centers.

In the coming years, advancements in quantum computing technology are anticipated. Companies in this field are expected to reduce the size of their chips, improve accuracy, and lower manufacturing costs. Additionally, many are transitioning to provide their quantum computing capabilities as cloud-based services, making them increasingly useful for AI applications that require significant computational power.

This brings us to two key players in the quantum computing market: IonQ and Rigetti Computing. Let’s explore which of these early movers may represent a better investment option.

Comparing IonQ and Rigetti

IonQ offers three different quantum computing systems: the top-tier Aria system, the Forte system aimed at commercial usage, and the on-premise Forte Enterprise system. It primarily targets government clients and educational institutions with both its products and cloud-based services.

IonQ is also focusing on developing “trapped ion” technology that could significantly miniaturize a quantum processing unit (QPU) from being several feet wide to just a few inches. This could ultimately lead to the creation of more powerful and cost-effective quantum computing systems.

However, IonQ faced some challenges when its co-founder and chief scientist, Chris Monroe, stepped down unexpectedly last year. Despite this setback, the company continued to expand by installing more systems, securing government contracts, and forming new partnerships related to AI.

On the other hand, Rigetti designs and produces its own QPUs, allowing developers to create their quantum algorithms on its Forest cloud platform. This integrated approach positions Rigetti as a "full stack" quantum computing enterprise.

Rigetti shares a similar goal with IonQ: to create more affordable and scalable QPUs for commercial use. However, Chad Rigetti, the company founder, unexpectedly resigned from his positions in December 2022. This led to some initial investor concerns, but Rigetti quickly reassured the market by launching two significant products.

One of these is the Novera QPU, a 9-qubit model priced at $900,000, which has already gained interest from several major governmental and research clients. They have also launched their first 84-qubit Ankaa-3 system, engineered to detect over 99% of processing errors, with plans for a more advanced 100-qubit version scheduled for release within the year.

Future Prospects for IonQ and Rigetti

Both IonQ and Rigetti went public through mergers with special purpose acquisition companies (SPACs), but both have experienced revenue shortfalls compared to earlier optimistic projections. For instance, IonQ reported revenue of $22 million for 2023, while Rigetti generated just $12 million; both figures significantly lagged behind their respective goals of $34 million.

Despite these revelations, both stocks reached new highs in December 2024 as investors reacted positively to current advancements. Analysts predict that IonQ’s revenue will soar at a compound annual growth rate (CAGR) of 89%, hitting $148 million by 2026, while Rigetti is forecasted to grow at a CAGR of 43%, reaching $35 million.

Unfortunately, both companies are expected to continue operating at a loss for the near future and may dilute their shares to manage cash flow and cover stock-based compensation expenses. Since their SPAC mergers, IonQ has raised its share count by only 10%, whereas Rigetti has seen a 69% increase in its shares.

The valuations of both companies are also notably high. IonQ's enterprise value stands at $8.8 billion, translating to 59 times its estimated sales for 2026. Meanwhile, Rigetti’s enterprise value is approximately $4.3 billion, equating to a staggering 123 times its projected sales for the same year.

Conclusion: Which Stock is the Better Buy?

The quantum computing industry is expected to expand at a CAGR of 34.8% from 2024 to 2032 as technology advances towards smaller chips and improved error detection. Both IonQ and Rigetti stand to gain from this market growth. However, investors should be cautious about their high valuations. At present, IonQ presents a more attractive option due to its greater scale, faster growth potential, lower dilution, and comparatively better valuation, making it a more favorable investment than Rigetti.

AI, Quantum, Investment