The Future of Rigetti Computing: Opportunities and Challenges

Rigetti Computing is a small but ambitious player in the quantum computing arena, and it certainly has a lot to prove. The company made headlines by going public on March 2, 2022, through a merger with a special purpose acquisition company (SPAC). The initial excitement saw its stock open at $9.75; however, it faced a considerable decline, hitting an all-time low of just $0.38 on May 3, 2023. The drop was attributed to factors such as missed performance expectations, significant financial losses, and the sudden resignation of its founder, Chad Rigetti, from key leadership roles in December 2022. The broader market trends, including rising interest rates, further impacted its stock value by steering investors away from speculative ventures.

Recently, Rigetti's stock has seen a recovery and currently trades around $13.50. An investment of $10,000 made at its lowest point would have grown to approximately $333,260 in less than two years. So, what has led to this resurgence, and can Rigetti continue to gain traction over the next three years?

What Sets Rigetti Computing Apart?

Unlike traditional computers, which operate on binary bits represented as zeros and ones, quantum computers utilize quantum bits (or qubits) to represent both zeros and ones simultaneously. This capability allows quantum computers to process massive amounts of data at unprecedented speeds, making them potentially far superior for specific tasks compared to even the fastest digital supercomputers.

However, the technology has its challenges. Quantum computers are generally more extensive, more expensive, and have higher error rates than traditional computing systems. As of now, their usage is significantly limited to universities and government agencies that rely on them for specialized research. Nevertheless, as advancements continue, there is hope that these systems may eventually be adopted for more mainstream applications such as data analytics and artificial intelligence.

Rigetti takes a comprehensive approach by designing and manufacturing its own quantum processing units (QPUs), developing various quantum computing systems, and offering a cloud platform for quantum application development. This strategy positions Rigetti as a "full stack" player in the quantum computing sector.

Last December, the company released its Novera QPU, a 9-qubit commercial version priced at $900,000. It secured orders from notable customers like the Superconducting Quantum Materials and Systems Center (SQMS) and the Air Force Research Lab (AFRL). Rigetti also launched its Ankaa-3 quantum computing system, featuring 84 qubits and the capability to detect over 99% of its errors, enhancing its cloud platform’s performance.

The continued introduction of innovative products signifies Rigetti's potential to grow, even in the absence of its founder's oversight. Although Chad Rigetti remains involved with product development, Dr. Subodh Kulkarni, who previously led a technology firm, has taken over as CEO.

Looking Ahead: Rigetti's Future Plans

In the coming year, Rigetti plans to launch a modular quantum computing system that connects four of its 9-qubit chips, resulting in a 36-qubit system boasting a median gate fidelity of 99.5%. By the end of 2026, the company aims to roll out a non-modular system with over 100 qubits and the same median gate fidelity. Moreover, plans are in place for an even more powerful 336-qubit system to be launched in the near future.

Financial analysts project that Rigetti will generate approximately $11 million in revenue in 2024. This figure is expected to increase by 41% to $16 million in 2025 and surge by 127% to $35 million in 2026 as the company delivers more commercial systems and expands its cloud offerings. While these forecasts are impressive, Rigetti currently holds an enterprise value of $3.7 billion, translating to 105 times its anticipated sales for 2026. Furthermore, the company is not expected to reach profitability anytime soon.

This backdrop has prompted Kulkarni to advise investors to moderate their expectations for the near term, particularly regarding the quantum computing industry. Nvidia’s CEO, Jensen Huang, has also weighed in, stating that truly useful quantum computers might still be decades away.

Nonetheless, according to market research, the quantum computing sector is predicted to grow at a compound annual growth rate (CAGR) of 34.8% from 2024 to 2032. If Rigetti can keep pace with this growth, it may reach revenues of around $120 million by 2032. However, this expected growth is already reflected in the company's current trading price, which exceeds 30 times the optimistic revenue estimates for 2025.

Conclusion: What Lies Ahead for Rigetti?

In summary, Rigetti Computing is likely to experience significant volatility in its stock price over the next three years, driven by news and market developments. There is a possibility that its stock could sink by more than 90% before it achieves a reasonable valuation relative to its growth potential. At this stage, it seems unlikely that Rigetti will outperform the market through 2028, and it may lose some of its appeal as its valuation moderates to more sustainable levels.

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