The Future of Rigetti Computing: A Look Ahead

Rigetti Computing, a company focused on developing quantum computing systems, still has a significant journey ahead of it.

Rigetti Computing (RGTI 7.07%) made its public debut by merging with a special purpose acquisition company (SPAC) on March 2, 2022. The initial stock price opened at $9.75 but dropped dramatically to a low of $0.38 on May 3, 2023. This decline was attributed to the company missing its pre-merger forecasts, incurring considerable losses, and the unexpected resignation of its founder Chad Rigetti from his roles as president, CEO, and director in December 2022. Additionally, rising interest rates further impacted investor confidence, leading to a shift away from speculative stocks.

As of now, Rigetti's stock is trading at approximately $13.50. A $10,000 investment during its lowest point would have significantly increased to around $333,260 in less than two years. Let's examine the factors contributing to Rigetti's stock recovery and the potential for further growth over the next three years.

Factors Behind Rigetti Computing's Market Recovery

Traditional computers operate using binary bits, meaning data is stored as zeros and ones without any variations. Conversely, quantum computers utilize quantum bits (qubits) that can represent both zeros and ones simultaneously. This capability enables quantum computers to handle substantial amounts of data much more rapidly. For certain tasks, even a relatively modest quantum computer can outperform the fastest conventional supercomputers.

However, quantum computers face challenges, including their large size, high cost, and a tendency to produce errors more frequently than traditional computers. The current stage of development for practical quantum systems means that their real-world applications are still quite limited. Most of their use currently comes from universities and government institutions conducting specialized research. As quantum technology evolves to become smaller, more affordable, and more precise, broader applications in mainstream computing tasks like analytics and AI are anticipated.

Rigetti distinguishes itself by designing and producing its own quantum processing units (QPUs), creating both modular and non-modular quantum computing systems, and offering a cloud infrastructure platform for quantum application development. This comprehensive approach presents Rigetti as a full-stack player within the quantum computing landscape.

In December 2022, Rigetti introduced its Novera QPU, a commercial 9-qubit quantum computer priced at $900,000. Major customers such as the Superconducting Quantum Materials and Systems Center (SQMS), Air Force Research Lab (AFRL), and Horizon Quantum Computing in Singapore have made orders for these QPUs. Rigetti also implemented its first 84-qubit Ankaa-3 quantum system, designed to identify over 99% of its errors, enhancing its cloud-based computational capabilities.

These product developments demonstrate that Rigetti can sustain growth, even in the absence of its founder's direct leadership. Although Chad Rigetti has resigned from his executive roles, he remains with the company to concentrate on product development, while Dr. Subodh Kulkarni, with experience from the 3D-sensing firm CyberOptics, steps in as CEO.

Future Plans for Rigetti Computing

In the current year, Rigetti aims to introduce a modular quantum computing system that integrates four of its 9-qubit chips, producing a 36-qubit system with a median gate fidelity of 99.5%. By the end of 2026, the company plans to deploy a non-modular system boasting over 100 qubits and a median gate fidelity of 99.5%. Additionally, Rigetti anticipates launching a more advanced 336-qubit system in the upcoming years.

Analysts project Rigetti will achieve revenues of $11 million in 2024, an increase of 41% to $16 million in 2025, and a further jump of 127% to $35 million in 2026 as it ships more commercial systems and enhances its cloud platform. While this growth trajectory seems impressive, the company currently holds an enterprise value of $3.7 billion, trading at 105 times its expected sales for 2026. Additionally, Rigetti is unlikely to reach breakeven in the near future.

Dr. Kulkarni has cautioned investors to moderate their short-term expectations regarding the quantum computing market. Similarly, Nvidia CEO Jensen Huang recently dampened enthusiasm for the sector by stating that "very useful quantum computers are still a few decades away."

According to Fortune Business Insights, the quantum computing market is anticipated to expand at a compound annual growth rate (CAGR) of 34.8% from 2024 to 2032. If Rigetti aligns with this growth pattern, it could generate revenues of $120 million by 2032. However, the company appears to be trading at over 30 times that optimistic projection by 2025.

Predicting Rigetti's Trajectory Over the Next Three Years

In conclusion, Rigetti is likely to remain a volatile stock influenced by market news over the next three years. It may experience fluctuations that could lead to it losing over 90% of its value before achieving a more accurate valuation consistent with its growth potential. At this point, there are doubts whether Rigetti will surpass overall market performance through 2028. Instead, the stock may dim as its valuations adjust to more reasonable levels.

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